Budgeting Part 3: Reduce Your Spending
Here's part 3 of our budgeting series courtesy of Marotta Asset Management:
If you need more money to makes ends meet, you can earn more or spend less. Both take work, but making a game out of the latter can reap more rewards than Monopoly. Let’s roll the dice and get started. You’ll be amazed at how much money you can save.
Reduce your fixed expenses. Many people make the mistake of thinking that fixed expenses are fixed. Usually they are not, and when you reduce their costs you save money every month without even noticing it.
Look at all your bills to see how you can reduce them. Do you really use all those features on your telephone bill? A $35 per month feature package can be replaced by a $15 answering machine. Is renting movies cheaper than all those television channels? Consider switching or modifying your car insurance; you can often save hundreds of dollars a year. Evaluate what subscriptions you actually read.
Share with your friends. Outgrown kids clothes and toys can be given to another family. Services and expertise can be exchanged. Magazine subscriptions can be shared. Books, tapes and CDs can be borrowed. Tools can be loaned. In the frontier days families helped each other; general stores came much later.
Don’t eat out. The average family spends 6.1% of their income on eating out. For many people eating out is a reward for working hard all day. But if you are having trouble saving 10% of your income, this one lifestyle change could change your financial outlook.
Buy used. The value of most items drops sharply. Purchasing used books, CDs and video games can save you a tremendous amount of money. Many sites on the internet provide a secondary market in used items. Sell your own used items when you are done with them to generate a little additional spending money.
Wear it out. You can save money simply by using the things you already have longer before replacing them. A century ago people would even mend holes in their socks rather than throwing them out. Much of what we throw away still performs its intended function even if it isn’t perfect. Advertising teaches us to discard the old and buy the new so that we will always be in style. Wisdom teaches patience and perseverance, almost lost virtues in our current culture.
Make fun of advertising. It is designed to make you dissatisfied with what you have and long for things you didn’t even know you needed. When I was young my family would make the claims of commercials explicit and then question their truthfulness. Wonder Bread really didn’t build our body twelve ways, and if it did, then whole wheat bread would build our body 67 ways. Making fun of commercials inoculated us against some of their effects.
Don’t go shopping without a specific list of needs. Millions of people are addicted to window shopping. If you are one of them and also having trouble keeping a budget, you need to find a more healthy addiction. About half of all purchases are impulse buying. Impulse buying is leaving the store with anything that wasn’t on your list when you went into the store. Only about one out of four people in the mall are there to buy a specific item. Perhaps that’s why we have more shopping malls than high schools in the United States.
Force yourself to wait. If I see an item I didn’t intend to buy, I wait a week before coming back to purchase it. Most of the time it isn’t important enough to go back for. The item caught my eye, but because I refused to buy it immediately, it did not capture my business. Many intelligent people are working as hard as they can to separate you from your money. You are the only one working to resist them. Make them work hard to convince you they are offering a quality product at a reasonable price, that you need.
Shop for a lower price. Prices vary widely for the exact same item at different stores. For items that don’t require service, check the price and selection on the Internet. And don’t be afraid to bargain even at stores where you wouldn’t think to bargain. As a rule of thumb you can get a 5% discount for one item, and if you are buying three or more items ask for 10%. Most store owners will give a small discount to make the sale and gain good will.
Buy quality not brand names. The bigger the brand name, the more your price includes the cost of their advertising. The most heavily advertised items are often not the best deal.
Anticipate your purchases. If you plan your purchases ahead of time, you can afford to do the research necessary to get the best price. Researching quality takes time, as does finding the best price. And if you purchase in quantity you will often be able to negotiate a better price.
Remember that toward the end of the Monopoly game, the best place to be is in jail. Three turns in jail saves you from landing on three additional properties that might bankrupt your finances. The biggest lie from advertising is that you can buy happiness by spending money, and the more the merrier.
But spending less money isn’t an end it itself. Directing your spending to what you truly value is what is important, and that’s the freedom a budget provides.
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I especially like the "make fun of advertising" suggestion. ;-)
If you're looking for more money saving tips, check out my saving money category here at Free Money Finance. It contains a boatload of ideas for saving money. Simply click the link and then scroll down to read them all.
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