Learn to Trim Fat From Your Piggy Bank

Making a budget actually work can be tough. Life constantly finds ways to dip its hand into our pockets. We’re used to being able to do things and have things we enjoy, but as prices continue to rise, and remain higher than we’d like, we may need to reevaluate how we’re spending our money. This means if you don’t have a budget, it’s time to create one. Also, if you do have a budget but always come up short, it may be time to revise it.

Either way, you need to learn how to make a personal budget that will work for your income and lifestyle. To help, we’re listing out the typical budget categories and some options to consider that can help you cut costs.

Housing

Ideally, housing should not exceed 25 percent of your take-home pay. This can be a tough mark to hit in the current real estate market. Rents often exceed mortgage payments, but mortgages are also pricey thanks to a short supply of housing and interest rates that won’t come down.

Here’s our recommendations:

• Consider getting a roommate or becoming a roommate to share housing costs.
• Rent out a room or portion of your home. Enroll in a service like Airbnb, for example, for short-term rentals, or set up a space for longer term renters.
• Downsize to a smaller apartment or rental. A smaller space may save on utilities too.
• Relocate to a more affordable area.
• If you own, learn how to do simple repairs, routine maintenance and landscaping that otherwise might eat into your budget.
   

Utilities

If you’re a renter, finding a rental that includes utilities is getting harder and harder. You’re usually going to be responsible for electricity and water at the very least. If you own a home, you may have some choice in your energy provider, and you may be able to shop around to lock in the most favorable rate. Regardless, you’re going to want to be careful about usage.

• Look into budget payments. The energy company can set a monthly payment that will be the same each month to balance out high usage months year-round.
• Unplug appliances while they’re not in use. Phantom power—devices and appliances that consume energy just being plugged in — can account for up to 10 percent of household energy use according to the Lawrence Berkeley National Laboratory. If you have clusters of plugs, a power strip will let you control them all with one.
• Conserve resources. In summer, set the thermostat a little warmer. In the winter, set it a bit cooler. If you go away on a trip, set it for less energy usage. A programmable or AI-enabled thermostat can help with timing savings and comfort.
• Reduce usage for areas of your home that you don’t use. Smaller spaces need less energy to heat or cool them.

Transportation

If you have or are considering buying a car, your car loan and insurance should not represent more than 10% of your net monthly income. However, you also need to account for fuel costs to make it run.

• Consider ride-sharing or carpooling to share fuel costs.
• Use public transportation if it’s available.
• Walk or bicycle when possible.
• Buy a used car instead of new. Similarly, purchase a car that’s cheaper to insure.
• Keep up with car maintenance. Delayed maintenance can result in mechanical failures and hefty repair bills.
• Avoid custom after-market upgrades or alterations. They’re pricey and may actually devalue your vehicle.
• Drive safely, and avoid behaviors that can increase your car insurance. You may be able to take advantage of safe driver, bundling or other discounts on monthly premiums.

Food and Dining

Food and out-of-home dining costs should only run between 10 percent and 15 percent of take-home pay. Frugal savers may even reduce that amount by cutting unnecessary restaurant outings each week. Here’s how to cut down even more:

• Pay attention to grocery store specials. Most stores run their specials from Wednesday to the following Tuesday and may add weekend-only deals. Take advantage of the buy-one-get-one offers and seasonal discounts. Nearly every store has an app that lets you make a list from weekly ads.
• Plan your weekly menus so that you don’t overbuy. Decide beforehand what you’ll be eating.
• Coupon as much as possible. Few coupons are available for unprocessed produce and meats, but coupons can help with cleaning products, convenience and packaged foods, and supplies. Check your store’s app for instore coupons.
• Get multiple uses out of a meal. Make a lasagna or other casserole that offers tasty leftovers for later in the week. Or, roast a chicken, for example, and use the leftovers in soup, enchiladas or sandwiches.
• Buy seasonally available foods. What’s currently in harvest locally will be less expensive than what had to be shipped from another continent.

Entertainment

The entertainment category can cover a lot of territory, so it’s often lumped under the term “wants” versus “needs.” Following the 50/30/20 rule, no more than 30 percent of your net income should go to all of your wants. Trim down on fun time with these tips:

• For gatherings with friends, opt for a potluck, charcuterie or cooking get-together rather than dining out.
• Choose outside recreation like walking or bicycling in the park over high-ticket activities that are often sedentary. You can be healthy and save money.
• If friends want to plan an event, opt for a day trip or local venue versus a cruise, for example. Be careful about sharing costs—especially for luxuries you won’t enjoy.
• If you like going to sports games, sign up for promotions to take advantage of any discounts or freebies.
• Pick the matinee showing at the movies over the Friday or Saturday evening showings.
• Evaluate media and streaming services and subscriptions to see what can be bundled, eliminated or shared with a roommate, for example.

Clothes

This is a tough one, but experts allocate just 5 percent of your net income to clothing purchases. According to Earth.org, the average US consumer throws away 81.5 pounds of clothes every year. Here are some things to consider before hitting the “buy” button:

• Buy quality pieces secondhand. This can be especially effective for special events.
• Learn how to care for your clothes so that they last. Learn to sew and mend, remove stains, hand wash, and block or line dry clothing requiring special care.
• Invest in staple clothing items that won’t quickly go out of style. This way, you can get more mileage from the purchases you make and won’t feel the need to replace items as often.

Set Yourself Up for Savings

While the percentages allocated to each portion of a budget can vary and even overlap, the real key is to keep returning to the 50/30/20 rule we mentioned earlier. Your needs merit 50 percent of your net income—housing, utilities, insurance, basic food and clothing, for example.

For wants, 30 percent or less needs to cover it because you really need to have a goal of setting aside 20 percent in savings. If you’d like more information on how to make a personal budget that will work for you, visit ACHIEVE. It’s a great place to learn more about budgeting and gain some real financial insights.