10 ways to find the
fat in your budget
You just have to be willing
to look. Start with your fixed expenses, then review your discretionary
costs. You don't have to give up the things you love to save money.
By Mary Rowland
Finding the fat in your
budget doesn't sound sexy - until you visualize the new, svelte
In a matter of a couple of
years, you can change your entire lifestyle to the better by simply
adhering to a few budgetary constraints. Here are my top 10 ways
to trim up your budget:
- Focus on fixed expenses: Just because they're "fixed,"
doesn't mean they're not negotiable. Many items are fixed only
in that they come out of your paycheck every month or you write
checks for them automatically -- like rent and life insurance.
So start at the top. Each budget item deserves a full airing.
- Rent or mortgage: Your home is your castle. But can you afford
the one you have? Moving is not something you're going to do tomorrow.
But if your castle is eating up more than 25% of your income,
start making long-term plans. Add extra money to pay down your
mortgage. Think about moving to a cheaper home or apartment. Tax
law provides an incentive to trade down: $500,000 in tax-free
capital gains on a home, no matter what your age.
- Utilities: Turn down the heat and air conditioning. Analyze
your phone needs. Do you need so many lines? Is your cell phone
- Insurance: If your term life insurance policy is five or more
years old, you're in for a pleasant surprise. Term rates have
been heading straight down over that period. You can almost certainly
get a better rate. Increase the deductibles on your auto and homeowner's
policies, too, to save money, and drop collision insurance if
your car is paid for. Don't skip disability insurance, though.
If you can't work due to a disability, you could jeopardize everything
- Groceries: Think about the foods that are really pleasurable
to you. Don't cut corners there. But how about bottled water?
Is there any difference between the brand for $1.99 and the one
for $3.99? Do you really enjoy the prepared foods you buy? Could
you make something fresh and simple -- and cheaper?
- Clothing: What can we say? The biggest enemy of a clothing
budget is impulse. You need a strategy. Make a list of what you
need. Shop from your list. Buy the best you can afford. Think
about all the stuff you have hanging in your closet.
- Transportation: This item can eat up 50% of a budget. Don't
tell yourself you're going to stop visiting your girlfriend or
significant other on the weekends. But take a hard look at where
you can save. Set a budget for transportation. Negotiate for bargain
airfares. Cars are better made and last much longer than they
used to. Get one you like. Take good care of it. And keep it two
years longer. Or three. Walk instead of taking a cab.
- Household and babysitting help: It's tough cutting corners
here. If you've found a good caretaker for your children, don't
cut his or her pay. Supportive people to help in your business
and home can make your life run much more smoothly.
- Credit: This one has lots of opportunities for reductions.
Pick up two months' worth of credit-card bills and total up the
interest you paid. If you pay off your credit cards, you will
save that much every month.
- Taxes: Contribute to your 401(k) and make use of health-care
and dependent-care spending accounts at work.
Of course, you must focus
on discretionary spending as well. The key, however, is to choose
something that makes your life better -- that enriches it rather
than diminishes it. For example, consider the pat advice to jot
down everything you spend in a notebook. How tedious!
But try turning it around.
Every time you decide to forgo a purchase, you put that money in
your savings bank. You skip a latte, that's $3. You walk instead
of taking the bus or subway, $1.50. You pack your own lunch, $10.
So look at discretionary
expenses to see what you can do here. Think of positive lifestyle
changes. Vacations, too, can be thrilling without being costly if
you do some research and plan a trip that allows you to explore
and further an interest. "There are lots of ways to economize
that have nothing to do with Dacyzyn-like asceticism and that may
actually enrich your lives," says Mark Hiatt, referring to
Amy Dacyzyn, publisher of the Tightwad Gazette and one of the leaders
of the Simple Living movement.
And Mark's right. You can
find the fat in your budget. It just takes a little creativity and
willingness on your part.