If you’re anything like us, the words “I’m so broke” are part of your regular vocabulary. Living a full life, taking advantage of everything the cities we live in have to offer, even staying in shape can get super expensive, super quick. But just as we are all guilty of overpaying for that delicious, totally-worth-it smoothie, we can also be guilty of blindly spending on things we’re not even thinking twice about (ahem, that monthly Dropbox subscription you haven’t used since 2010).
So, what are some ways to curb your budget while also maintaining your sanity and partaking in the things you enjoy? We got right to the source to find out. Kimmie Greene, a consumer finance expert for the budgeting app Mint, shed some light on the ways we’re spending money without thinking about it, how to stop ourselves from doing that and how to get the most bang for our buck.
“So many of us have the ‘have to have it’ mentality, especially in the society we live in where instant gratification, FOMO and the importance of staying on trend can impact our purchase decision skills,” she says. “But if you can break the habit of mindless spending early, your budget will thank you in the years to come.” Here’s how.
Take control of mindless habits
Greene says that things that seem small, such as trips to the coffee shop, weekend getaways, your monthly spa habit or latest tech obsessions, can add up. She notes that many Mint users spent triple the amount of money on alcohol and bars than they did in coffee shops. “Taking little steps like bringing cash out to a bar versus keeping a tab open and unsubscribing from email newsletters of all your favorite stores can help alleviate impulse purchases,” she says.
“Making a budget isn’t difficult, but can seem daunting if you don’t have a clear view of where you’re spending,” Greene says. The most important thing to figure out first is where you would least mind scaling back. “Look for things you know you can live comfortably without, whether it be your smoothie habit, going out to lunch during the week or anything that’s more of a want than a need,” she says. We know that weekly manicure is great and all, but maybe it’s worth trying your own hand at it every now and then.
When asked about ways to save on things like prescriptions and subscriptions, Greene says you should prioritize the top services you can’t live without. “Whether it’s the latest fitness gear, beauty products or clothes to keep you in style, you don’t need to have them all if they don’t fit in your budget,” she says. Those monthly auto-renew subscriptions may seem like a small amount each month, but they certainly add up.
Sure, it’s easy to go with the first option when it comes to things like, say, prescriptions or auto insurance, but Greene says it’s important to research industry advantages. “By doing an audit of how much certain things cost, you’ll feel empowered to make a more informed decision when making these purchases,” she explains.
Finally, properly budget
These tools mean nothing if you don’t put them into practice. Greene suggests using the 50/20/30 budget, “a proportional guideline that can help you keep your spending in alignment with your savings goals.” Here’s how it works:
One half of your income should be essentials: To begin abiding by this rule, set aside no more than half of your income for the absolute necessities in your life. This might seem like a high percentage (and, at 50 percent, it is), but once you consider everything that falls into this category, it begins to make a bit more sense. To be clear, your essential expenses are those you would almost certainly have to pay, regardless of where you lived, where you worked or what your future plans happen to include. In general, these expenses are nearly the same for everyone and include housing, food, transportation costs and utility bills. The percentage lets you adjust, while still maintaining a sound, balanced budget.
Twenty percent of your income should be savings: The next step is to dedicate 20 percent of your take-home pay toward savings. This includes savings plans, debt payments and rainy-day funds—things you should add to, but which wouldn’t endanger your life or leave you homeless if you didn’t. Think of this as your “get ahead” category.
30 percent of your income should be for personal needs: The last category, and the one that can make the most difference in your budget, is unnecessary expenses that enhance your lifestyle. Some financial experts consider this last category completely discretionary, but in today’s world, many of these so-called luxuries have taken on more of a mandatory status. It all depends on what you want out of life and what you’re willing to sacrifice. The reason that this category accounts for a larger percentage than your savings is because so many things falls into it. Sure, you can make adjustments with a tweak here and a nudge there, but by staying close to the core concept of this budgeting system, you’re on your way to gaining financial ground.