How do you maintain a spending plan when your bills are creeping up each month? Inflation is a normal part of our economy, and overall inflation is relatively average right now. But even normal inflation means that costs go up every year, and every year has some categories where those price increases can be steep.
Thankfully, the military pay charts have several pay bumps built right in: annual cost-of-living adjustments, promotion increases and time-in-service increases. But those pay changes don’t always come at the same time as your bills increase. So, how do you keep your spending in line?
1. It Starts With a Spending Plan
The first step in managing your expenses is to actually have a spending plan. Whether you track broad categories or dig down into small details, some sort of plan for your money is essential to creating financial structure. Having a plan allows you to identify specific areas where you can adjust your spending, instead of making broad guesses like, “We need to spend less.” It’s much easier to accomplish something more specific like, “I’m going to cut back on eating lunches out.”
There are two main categories of spending: fixed expenses and variable expenses. Fixed expenses are the expenses that change cost infrequently: rent, auto insurance, student loan payments. Variable expenses can be controlled on a month-to-month basis. For example, food, entertainment and clothing are all variable expenses.
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2. Figure Out Where to Cut
When figuring out where to cut your spending, consider your values. What’s actually important to you in life? For example, if you value your friendships, then maybe you would rather cut back on clothing purchases so you can continue to do social activities with your friends. On the flip side, if education is a priority for you, then maybe you want to prioritize your child’s extracurricular activities over a nicer apartment.
It’s easier to cut variable expenses in the short term, but making cuts to your fixed expenses pays off month after month. When fixed expenses can be changed, look there. If your lease is up, consider whether a less expensive apartment makes sense -- after considering all the costs of moving! Small but permanent changes can be more impactful over time.
Two tips may help you make cuts to spending. First, consider whether you could decrease any category by just 5% or 10%. That can feel a lot more manageable than bigger cuts. For example, maybe instead of going out with friends every weekend, you invite them to your place one weekend a month. It’s still not free to entertain, but it’s typically far cheaper than going out. Another tip is to consider whether you could make bigger cuts for a short term. For example, what if you cut your coffee habit in half for two months -- what would that look like?
3. Be Realistic
Don’t be over optimistic about your ability to decrease your spending. Update your spending plan with realistic numbers as utilities, insurance and other recurring bills increase. Reviewing several months of spending can help you see trends, such as higher food costs or adding a new entertainment subscription.
As my wise friend says, budget liberally, spend conservatively. It works out a lot better than building a bare-bones budget then consistently overspending.
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4. Your Spending Plan Isn’t Fixed
It’s useful to think about your spending plan as a constantly changing system. Yes, you’ll make major updates when life changes: PCS moves, pay increases, and paying off a debt. But day-to-day spending may change from month to month.
Tracking actual spending helps prevent gradual drift away from what you’ve planned to spend. This allows you to either adjust your spending or adjust your spending plan.
5. Food: The Biggest Variable Expense
In most families, the biggest expense categories are housing, transportation, medical and food in no particular order. For service members and military families, health care costs are very low, so the big three are housing, transportation and food. Of these three categories, it’s harder to make changes to your housing and transportation budgets. But if there’s room for wiggle, it’s usually in your food budget.
Your food budget usually has a couple of different parts: groceries for eating at home, actual meals out, and snacks and drinks that you pick up along the day. Each one of these parts usually has multiple ways to decrease spending.
For groceries, the three main steps are to plan your meals, to use what’s already in your house, and to shop with a list of exactly what you need. Be sure to include snacks and easy-to-eat foods so you aren’t tempted to order food or go out to eat. Once you get good at meal planning and shopping with a list, you can incorporate sale items and buy common ingredients in bulk when it truly makes sense. For example, I just picked up eight cans of diced green chilis that were more than half off the regular price. They are a staple of many of my recipes, so that made sense for me. Keep in mind when you’ll move next to avoid overbuying!
For meals out, consider where you’d like to cut back. Most workspaces have a refrigerator and microwave to make it easy to bring lunch, especially if you have leftovers from dinner. Invite friends for dinner instead of going to a restaurant.
Snacks and drink purchases can be reduced by buying those items as groceries instead of from convenience stores or vending machines. For example, 12 packs of Coca-Cola cans are three for $13.99 at Walgreens near me this week. That’s under 40 cents a can, compared to $1.25 or more in a vending machine. If you drink two cokes a day, that’s $51 saved per month. Astounding.
While not always as flexible, look at your recurring services such as subscriptions, and figure out how to pay down your debt. Both will make a big impact on your overall financial flexibility.
Planning and watching your spending is the only way to address constantly increasing costs. It takes a little time, but it reduces stress, decreases the chances you’ll go further into debt, and helps position you for a positive financial future.
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