Setting a monthly budget can be one of the most important steps to improving your financial well-being and working towards building wealth. However, setting a budget can only do so much if there isn't a lot of money left over after all your bills have been paid.
If you want to add more to your savings, then you need to take a closer look at your monthly budget and start putting these seven common budgeting practices to work for you.
- Track your spending
Before you can begin to reduce your spending, you need to understand exactly where your money is going. You might not be able to reduce the amount of money you have to spend on gas for commuting to and from work, but chances are that you can spend less on eating out and other entertainment.
Start by simply tracking your spending for a week. This will open your eyes to where your money is going. A lot of people who do this exercise end up surprised at how much they're spending in certain areas. It may reveal some spending and lifestyle habits you're able to adjust.
After a week of tracking every penny, identify three main areas where you would like to reduce spending. Instead of continuing to track everything you spend, which can be difficult to sustain, simply pay attention to these three areas and cut those expenses.
- Cut the cord
Cable is not cheap, and you are basically spending hundreds of dollars to have an easy way to kill time. With streaming services, there are plenty of less expensive ways to consume media, and you can still watch your favorite shows.
In fact, you can probably simply ask a household member to be added to their account, which could potentially help you save some money. Splitting the streaming bill each month with a family member, could provide substantial savings compared to paying for cable or other streaming packages for just yourself.
- Take a close look at your phone bill
This is another area of the budget that can quickly become inflated without you even realizing it. Take a look at your phone bill and see exactly what services you are paying for and whether you really need them. For example, you may be paying extra every month for data that you never use. You may even consider reducing your data usage in order to cut back on your bill.
Don't be afraid to call your provider to see if there are any better deals, or switch to another provider if you have to.
- Cancel unnecessary subscriptions
Whether you're subscribed to a streaming service you rarely use, or you are part of the beer of the month club, it might be time to cut back on monthly subscriptions.
When you're tracking spending each month, write out a separate list of all the subscriptions and memberships you have. You might have a meal-prepping service, a streaming service for movies or music, a gym membership, or something else entirely. Look at which ones you can cut back on and try to find an alternative. For example, with media streaming, do you really need a subscription to multiple streaming platforms? Pick one and consider canceling the others.
- Buy generic products
From food to shampoo and other hygiene products, most stores offer generic or store brand products for a fraction of name-brand products. If you have been loyal to certain, more expensive brands, you may be surprised to find that the generic alternatives are just as good.
The next time you're in the grocery store, and you go to grab your usual food brands, take a moment to look at the bottom shelves and grab a cheaper store-brand one instead. A lot of the time, you'll barely notice the difference between the products, so it can't hurt to try it out.
6. Make your own lunch
If you usually grab a bite to eat while at work, it probably doesn't feel like you're spending that much. But a sandwich here and a bagel there all adds up, especially if you're doing it every day.
When you're going through your monthly expenses, take a closer look at how much you spend on lunch. It may surprise you.
A simple way to reduce this cost is to just make your own lunch. It will take more time, but buying ingredients for sandwiches, soups, and salads can be cheaper than buying these items ready-made.
If you're short on time, try bulk prepping some lunches at the start of the week. For example, make a big batch of pasta salad to take to work. Or get into the habit of making extra for dinner each night, so you have leftovers the next day.
7. Try a no-spend month
A common savings challenge is to do a no-spend month. This can help those who need to drastically reduce their spending to cover an emergency expense or to save for something quickly.
The rules of a no-spend month are simple. You obviously need to keep paying for essentials like rent, fuel, food, and bills. But other than that, you spend nothing.
Things to completely cut are spending on clothes, movie tickets, days out, takeout, coffees, and alcohol. By cutting all of these items out of your budget, you'll significantly reduce spending for that month. Long-term, it's probably not sustainable, but this exercise can highlight what items you don't really miss spending on. So, maybe next month you can cut that expense altogether.
Ready to reduce your monthly budget?
While it might feel like there simply isn't any way to squeeze more money out of your monthly budget, there are always ways to save. A lot of the time, you only need to make minor adjustments to your spending. Start by understanding your budget and begin to shop around for cheaper alternatives that will help save money.