Things have become expensive. Between inflation, “shrink-flation” and the cost of raising a child (and two dogs), my wallet is tired. More than ever, I’m trying to keep my spending under control and budget my grocery bills. But before I dive in with budgeting tips, you must first understand your default spending.
#1 Understanding recurring costs and typical spending.
Before you budget your money, you have to understand how much you bring in vs the non-negotiables in your spending; This includes your rent/mortgage, insurance, utilities etc…
Then add in all the subscriptions you have currently. These are nice-to-haves (like Netflix) and add those up. What is your savings rate after this? This is your baseline to understand your default spending.
#2 Using an app or service to automatically track your spending.
After you understand the automatic spending you do, then you can use something like Nerd Wallet to track what you spend each month. Shopping purchases, going out to eat or ordering in and other discretionary spending will be caught. In times of stress, do you shop compulsively? There’s no denying that your Amazon addiction is out of control with spending trackers. I’m guilty of that from time to time.
#3 Groceries
Ah groceries. This is always seen as a “non-negotiable” category and of course that is true, however, the amount and quality of food I buy can range drastically. Do I want grass-fed beef from Whole Foods for $20 a steak or do I want ground turkey for $2 per lbs at Safeway? These are decisions that only you can decide based on your budget, health and ethical concerns of animal treatment, GMOs and other triggering topics I won’t get in to. That’s for you to decide on your own.
For parents, do you count diapers into a grocery budget since it’s often bought together? In my opinion, diapers can be added to the same list as “utilities.” There’s no getting around it and the price won’t vary. Nearly all the food you consume from a grocery store has a variety of price points. Frozen berries are cheaper than fresh ones, have the same nutritional value and last longer. But fresh berries are all my toddler eats. So there’s that.
#4 Create a Budget!
Now that you understand the spending creature within, it’s time to tame it. Eliminate excess subscriptions or wasteful spending and start saving. Find the savings rate you feel is manageable and evaluate your lifestyle. I like to aim for over 20% savings rate and hope to increase that once daycare fees are OVER. Here are some budgeting tips to trim the fat:
- Make all your food at home. Ordering out is easily 3X the cost to make it yourself.
- Consider buying frozen and/or bulk items. This is where Costco can be useful, although they have a lot of cool tempting items. Just avert your eyes when passing the electronics or outdoor furniture sections.
- Brew coffee at home – for $10 I get a bag of good quality ground coffee that lasts me two weeks. Meanwhile, ordering black coffee daily from Starbucks would cost me $43.96 for the same time period ($3.13 for a grande black coffee for 14 days). That is a over 4x more expensive than making it myself, and it doesn’t include tip, which I would feel obliged to do if I went in daily. Also I’m one of the crazy ones who only drink black coffee; Most people get a much fancier (and more expensive) drink from Starbucks, thus the savings are even bigger if they make coffee at home.
- Set a weekly grocery budget and stick to it. Meal prepping goes hand in hand with this tip and it is a lot of work but it does make a huge difference. I like to take make multiple meals using the same protein source but mix up how I prepare it. Ex. Chicken quesadillas, stir-fry chicken with veggies and grilled chicken with veggies. All very different flavors, but I can use the one large pack of chicken.
- Join a local Buy Nothing Group on Facebook. These are FANTASTIC groups that are not only great for getting free stuff, but also decluttering some of your own! I am constantly giving away baby clothes now that my daughter is 2 and not all my friends with babies want my hand-me-downs.
- Find budget-friendly fun things to do to keep yourself entertained while working towards your goals. One of the bigger arguments against budgeting and saving is that you only live once so why not spend? Well you hopefully live for a long time so the compromise would be to do fun things within your means!
#5 Savings is a non-negotiable
If you have financial security as a goal for your golden years, you must think of saving money as a non-negotiable. There are other financial bloggers (like Mr. Money Mustache) who are much smarter than I am on the subject that I encourage you to explore their ideas. For me, I like to “pay myself” by automatically transferring a certain amount of money into my savings account or investing it into an index fund. I also contribute to the level of maximum employer contribution set for my 401K.
Another good way to ensure you’re comfortable in your old age is to max out your 401K every year. You pay less in income taxes (if you’re in a state that does that) and the left over money that comes to you can be used with less guilt knowing you are working towards financial safety. I would still encourage having an emergency fund that equals 6 months of living expenses in case of illness or job loss.
Bonus Tip – Get the heck off social media
Social media can really be a fantastic way to keep in touch with friends and family by sending hilarious memes and random pictures. But beyond that, it can be detrimental to our mental health. That is my opinion and you can’t sway me on it. I felt the effects of targeted ads or influencers showing off new sponsored products that are “life-changing.” Then reality hits and now I’m a little poorer and that life-changing item is on my Buy Nothing group 12 months later. I see beautiful images of curated spaces and homes and try to emulate that but really who cares that half my furniture is traditional hand-me-downs while the other half is cheap modern Ikea furniture? It all works for me and looks like people live here. As long as my home is filled with love and fun for my family then I don’t really care that my interior design style is “whatever the heck is free/works.”
Conclusion
To close, managing money is a muscle you need to exercise to be good at. Understanding how you spend your hard-earned cash will help you in controlling it. By tracking your spending and following the budgeting tips, you can begin to build a sustainable budget and create breathing room. Budgets don’t have to be fun killers. It can be a new and rewarding challenge to change your mindset and your habits. Stay savvy friends.