Are You struggling to save money for things You would love to have? Stuck living paycheck to paycheck? Are Your bills eating up all the income and You are sick of hearing all those “Get extra income” tips? You got to the right article then. I will share how we managed to save approximately 30% of our costs by slightly changing our routines and building new habits.
I believe everyone wants to spend less on casual/boring things like bills and household supplies in order to have more money for relaxation, better lifestyle, hobbies or just something to put aside in their savings account. Recently we managed to cut monthly spending by about a third. And I’ll tell you how to do it!
In short, I could name two actions:
- Keep track of monthly expenses
- Plan a weekly meal.
If You are not the kind that would enjoy reading and stuff the shortcut could be just buying ready to use (cheap) templates and go with them. Like these for example:
Finance Planner, Printable kit:
Printable Weekly Meal Planner:
And there are plenty other like these. You can even get a Household planner if you would like to (but necessary needed if You have both above templates). It supper easy concept and for those who are still interested I will share a bit more with our experience and how we started.
When we are looking at budget form cost cutting perspective we are more interested in the highest cost items, our largest expenses. We want to know where money disappears and whether all spending is justified. So we began to explore bank account transactions and checks. It’s not rocket science but it’s important to understand that it’s a two step process: analyse and take action.
we can break it down into these smaller steps:
- Collect information
- Categorize the expenses
- Create cost overview
- Create a summary
- Make a decision and execute it
Let’s go through the whole process.
I find it hard to gather cash expenses because going through bunch of receipts is just so boring so I try my best to pay with a debit card wherever possible. Down of it is that it will be really hard to put it into category later on but we have aligned our expense categories to a the detail of our bank account transactions. in other words we try to sort bank transactions by the recipient of the transfer. Of course, there is a portion of the cost that can not be covered from the debit card (rent, market purchases, etc.), but most of our expenses are done through debit card nowadays.
To make it easier to “work” with bank account transactions, enter information from receipts in Excel together with account transactions and try to stick with a format that works for both. You will loose details from receipts, but it will be easier to draw some statistics out of it later on.
This raw data needs to be aggregated and split into categories in order to get the bigger picture. We try to categorize the expenses to see how they change month by month. It also helps to predict how much we should have in one or the other category at the beginning of the month.
Tip: Align your budget period to your income frequency.
Get paid weekly — do a weekly expense planing. Get paid monthly do the monthly one.
Of course it does not hurt to do a monthly budget even if You get paid every week, but Ideally You need to have a expense plan the moment You receive money. It’s harder for people that don’t have regular payment dates like self employed people. If You are one of them, I would recommend sticking to monthly plan. Actually, if You are self employed You most likely know everything about creating a budget.
Categorize the expenses
You can choose the categories you need yourself and more personalized (better fitting your needs) plan is a better plan. We have rather general categories that we will have to review at some point in our lives in order to make it more precise. The more general categories, the easier it is to split the expenses, but the less insight it gives… Today we are still using following categories:
- Apartment expenses
- Household supplies
- Unnecessary expenses
The most important of all categories is Unnecessary spending. In this category we put all the payments that we could had lived without or didn’t really need them. The longer we practice tracking our costs and be mindful what ends up in this category, the smaller this category gets. Actually we stopped spending money on totally stupid things pretty quickly once we started realizing how much we waste every month. Now, we are trying to recognize those spendings that we actually didn’t need. It’s a lot tougher process today compared how it was when we started this but we still try to do it.
The main purpose of this process is not to download a lot of bank account transactions and/or to collect bunch of papers in form of receipts, but to estimate what expenses were really necessary.
As soon as you begin to realize what your expense weakness is these expenses will decrease because You will already know in the back of your mind that if bought these will land in the bad category (whatever you will name it) of your expense list.
For me, the weakness was with Aliexpress purchases — I bought all kinds of unnecessary stuff (like different gadgets, tablets watches etc.) and most of it ended up in garbage. We have bought a lot of toys from Ali for our cat, but we wouldn’t categorize that as useless spending. It’s for our cat …
And actually pet toys from AliExpress are very good when we compare them to local store goods. And prices are lot better so nothing is black or white — we cannot say that buying from AliExpress means having Unnecessary expenses.
Create cost overview
Once all of the above has been done we need to put everything together and see how it looks in total picture. We need to sum together expenses per category (You can do this in previous step. That’s how we also do it now).
Here is an example of how this monthly summary can look like:
Here it’s important to be honest with yourself and first of all evaluate whether the summary seems to be plausible to you (whether there is any mistake in sorting the costs by category). Also try to explain to yourself why certain figures are higher than the others. A really good practice is to have the average per category and check the numbers that are way off the average after your first quarter doing this expense analysis. Usually there are large deviations from average in February due to Valentines day and in month when You have to pay taxes, insurance et cetera. Comment your figures if needed, but don’t leave a large deviation unexplained to yourself.
We recommend that you include average figures not only to see unusually high or lower inclination, but also because it will be useful in planning your funding next month. You might be surprised and not believe me right now but knowing how much You will need for each category really makes it easier to plan ahead. Now on payday I already clearly see how much excess money we have based on average monthly spending that we have while previously I had to guess or even worse — assumed that I have a lot of money in my pocket now.
Create a summary
Summarizing the above:
- To minimize the biggest and unnecessary costs, they must first be aware and accurately defined in themselves.
- In the clear consciousness where you spend a lot and where you do not have to spend your money at all, you will be able to recognize these unnecessary expenses and refrain from them.
It’s not obligatory to make your own summary in Excel, but it’s important to know clearly where are You ready and willing to spend your hard-earned money.
Make a decision and execute it
It’s good that we have a clear overview of our expenses, but serious results require serious efforts. If You wanted just to get rid of some unnecessary spending, this should be enough and weekly meal plan would put an extra kick to it. But if You are in serious debt situation You might be willing to go even few steps forder on cutting your expenses. What are next steps? Well, You name it. There are so many to do, but one thing is common to them all — You need to make a decision to apply them and then execute that decision.
A good starting point here is to sit with your list of expenses and go through each item on it. Look for things that You didn’t mark as unnecessary expense. Identify things that you want less than getting rid of your debt or saving for that things because of which You are reading this article. Then think in what order You will get rid of those things but be careful here. Try to find a way that’s least painful to you and your family members. Otherwise you won’t get rid of them.
Weekly meal plan
If the former seemed elementary, then this should not be a problem at all. It’s just as simple as it sounds — plan when, where and what you will eat. You’ll save money on spontaneous decisions! We borrowed this idea a bit from the Zero Waste movement representatives in — SeekTheSimple.
It goes hand in hand with what I wanted to highlight above — spending money only on what you choose to spend it on. Do not rely on impulses, because these impulses are often generated artificially and you’ll end up at McDonald’s ordering a big set with Big Tasty burgers…
It does not mean that you can not plan to eat outside house but if you still want to save some money try to schedule both meals at home and outside.
Start when You with your spouse are fed. Sit at a table and compile a list of meals for the next week. Give yourself the freedom to change the days when you will have them but stick to the dishes you put on the list. I would recommend compiling a list of three things:
- Meals for the next 7 days (we usually plan from Sunday to Sunday)
- Required ingredients for each meal
- Where to buy the right one
And here note that the more you can buy from the marketplace, the more you can save money for months when you did not plan your meal.
For us, our plan of food is relatively simple — we have 7 meals (dinner) planned, breakfast is random (whatever we love since it’s the most important meal of the day and we cannot skip it) and lunch is usually dinner from the day before. We experiment with different recipes and we also try out some recipes that I would call odd — recipes from vegan and vegetarian recommendations. Sometimes it turns out really good, sometimes…well not really. I would recommend You do that as well not only for new experiences, but also cutting off from meat also lets you prepare cheaper meals which in turn affects your budget.
Marketplace / Shops
We buy a lot of produce in nearest marketplace because we noticed that a lot of things are cheaper here. We do not feel the difference in quality and it’s from local farmers (potentially healthier than supermarket produce). But if something is available on the marketplace it does not mean that the store sells a lower quality alternative or you buy it cheaper on the marketplace. No, prices and quality must be followed very carefully. If you’re not careful you have a chance of getting a bad deal.
Evaluate what you are ready to pay, what you are ready to endure, and for how much. Each one of us of course has his/her own insight into things. We, for example, are not vegetarians and for us Eco goods are not a “must have” items. If we know that the product is not unhealthy then it is a pretty Eco for us.
As a practical example, eggs — we know that they can be bought from a farmer for 3 euros laid by healthy hen, but we will, however, take eggs from store and pay only 1.20 euros (more than half the price!). Eggs from store are a lot less “Eco” than the ones sold by farmers but we don’t really value them high enough to pay double.
I also recommend that you find your favorite places to buy food and I definitely recommend you go to explore the local market and its offer.
If your goal is to save money, be sure to look for recipes from ingredients that last a long time (eg beans, buckwheat, rice, etc.) and plan at least 2 meals a week using these products. When you buy these products, I recommend buying the package with biggest size that you can afford and store at home. The earlier you fill out your storage room, the longer you have these dishes with a “discount”.