Once you have begun to track all of your expenses carefully, you will begin to notice where to make appropriate cuts, good places to shift your resources, and other goals you might want to make. You get to decide what is meaningful.
Benjamin Franklin once said, “A penny saved is a penny earned.” If this is true, then a budget cut is the same thing as increasing your income.
Your goals and cuts should be SMART:
- Specific – Ensure you are stating specific goals. Example: “I will cut my restaurant budget by 25% this month.”
- Measurable – You need to have a way to measure if you succeeded or failed. With money, this is usually pretty easy. The example above is measurable; if you spent $100 on restaurants this month, you’ve succeeded if you spend $75 or less next month.
- Assignable – Usually this is assigned to you, but can be for anyone (especially if you have a family). “My spouse will maximize contributions to an IRA this year.”
- Realistic – Cutting your restaurant budget by 100% probably isn’t achievable in one month. Gradually changing a bad habit is the best way to achieve long-term success.
- Time-bound – Hold yourself accountable by setting a deadline. Goals with nebulous time frames you can adjust at will don’t help you.
Oft-cited ways to reduce spending are to cut cable, reduce cell phone plans to a minute/data level you actually use, cook at home/bring lunch to work, refinance a loan, cut coupons, de-link credit cards from online shopping sites, reduce use of your credit card & substitute cash, turn off lights when not in use, turn down the heat/air conditioning when not at home or sleeping, etc.
