Once you’ve got your budget and have been using it for a few months, you’ll be able to see where your money is actually going. This insight is incredibly powerful and allows you to put your budget to use in a real way that will help you save money.
My wife and I have found that through reviewing our spending over the course of six months or a year, we’re better able to tell how we can reduce our spending day-to-day in certain categories based on our tendencies. It allows us to make behavior changes based on real data, not just feelings. We’re by no means perfect. Not even close. Which means we can keep trying to do better.
Abagail and I identified the following spending categories at the beginning of 2019 based on our 2018 spending as easy places we could cut back without impacting our quality of life. We wanted to reduce spending in categories where the change would be significant: at least $100 or more. Here’s what we cut back on and how it’s been going.
I’ve got no problem admitting that I have a tendency to spend money on entertainment like games, movies, books, concerts, and comics. Our average spending on entertainment before getting serious about reducing our expenses was about $400/mo. That’s pretty high compared to the rest of our budget.
We’ve been budgeting $40 a month since the beginning of the year, which is much more reasonable. Also, the library, people. The library! Make use of it. It’s such a wonderful resource that not only offers physical media but access to digital books, comics, movies, and audiobooks. All for free.
Also, I’ve got hundreds of ebooks I already own that I want to read through. I’m focused on getting through those.
We’ve been doing well so far, spending anywhere from $40~60 so far this year. A 6x-to-10x decrease is pretty significant, and it hasn’t had an impact on our day-to-day at all. All of my entertainment spending was largely habitual.
Our average travel spending in 2018 was $925/mo. That has to do with going on vacations and some expensive flights, like a trip to Hawaii we took this year. We also had some little trips mixed in there to visit family and get away.
Travel is the the sort of thing where it can vary wildly in cost, and we want to use what we’ve learned from our recent trip to be more intentional about what we spend. We’re trying something new and that’s budgeting $400 a month to have a Travel fund available for whenever we do decide to go on a trip. This means instead of doing whatever we want, we have a budget to work within. We think we can definitely do well on $4,800 a year and still get out and experience the world.
We’ve started this monthly budgeting approach, but we won’t know for sure how it went until the end of 2019. If we can stick to it, a 2x reduction in spending would be nice.
We are trying a new approach to budgeting for clothing in a way similar to travel. In the past, we’d budget based on what our immediate needs were. But this led us to making impulse decisions since we didn’t have a set amount to work within.
Our 2018 average spending was $340/mo. We’re now allocating $200/mo. so that we have an amount to work within when we do need to buy clothes.
Creative Tools & Supplies
Guilty as charged. This category is all me. I enjoy buying art supplies and tools. But I’d say I only use about 25% of the stuff. It’s the classic collector’s problem. I buy one marker and feel the need to buy twenty more. Also, I bought some expensive technical gadgets in 2018. I’ve been using what I have in 2019 and not acquiring more.
Average spending in 2018: $339/mo. New goal: $0/mo. So far, so good.
Groceries & Dining Out
They’re two separate categories in our budget, but they’re about the same thing: eating.
Combined, groceries and dining out are our second highest monthly expense. So we’ve been more conscious with where we shop, what we buy, and how often we dine out.
We spent an average of $930/mo. on groceries in 2018, and $275/mo. on dining out. Our 2019 goals are $800/mo. and $250/mo., respectively.
I wrote a whole post called The Great Grocery Experiment on how this has been going. Three months into 2019, and we’re doing well. We’ve cut our grocery spending by over $200 a month and dining out by about $100.
Rent / Housing
Our largest monthly expense for the past year has been our rent. It’s $2,465 a month. It’s a pretty nice two-bedroom apartment in a new building, so it’s not cheap. Month-to-month we can’t change this expense easily, but we’ve got a bigger picture plan to drastically reduce it: we’re moving to Michigan when our lease ends. We’ll be closer to family and most likely be able to find a new place to rent that’s about half the cost of our current place.
Cutting our biggest expense in half would be incredible.
Why We’re Doing This
Our ultimate target is to reduce our spending to $4,000 a month or less. In 2018, our average spending was $6,682/mo. $4,000 is a bit of an arbitrary number, but if we can live well on that much, we’ll able to able to save, invest, and give well over 60% of our income. As that number keeps going up, the more freedom and stability we’ll have.
By analyzing our budget, we are able to objectively look at our spending behavior. Looking at it without having to justify it to one another or feeling guilty lets us come up with ways to reduce that spending. By identifying easy areas for improvement and taking action, we build up momentum and save across all categories. It’s teamwork at its best.
Also, we really believe that reducing our spending will let us focus on what truly makes us happy.
Reviewing Your Own Budget
YNAB, the budgeting tool we use, has helpful reporting on how you’re spending your money. I would imagine most budgeting tools have support for this. The best way to review your spending and make adjustments is to look at average spending per-category over an extended period of time, like six months or a year.
Start by analyzing your budget and looking at categories that stand out as noticeably higher than others. Look within yourself and be honest about where you may be spending more than you need to. Pick two or three categories and start there. Based on the average monthly number, set a new goal and try to stick with it for the next few months. We’ve found that once we started cutting back on a few categories, we wanted to be better across all categories.
We review our budget weekly as a couple, which helps us check in with how we’re doing. I’d recommend reviewing your spending on the regular.
It’s enlightening to see how much you spend on average throughout the year. It’s likely some categories will stick out. That’s a good thing. It means there’s room for improvement.
Give It a Try
I’d reckon that most people could cut back on their spending without that much effort. It just takes a little time to see where your money is going and what spending you could reduce.
See what happens when you start to cut your expenses intentionally based on your spending. While budgeting takes some regular effort, it gives you a lot of power to make better spending decisions.
I can’t wait to see what our numbers are at the end of 2019. I’m looking forward to sharing where we succeed and where we fail. Thanks for reading and following along.