According to a 2021 survey by The Penny Hoarder, more than 55 percent of Americans do not use a budget to manage their money. What’s more, 56 percent of survey respondents said they didn’t even know how much money they spent last month.
But as any financial expert will tell you, tracking your money is crucial to your overall financial wellbeing. According to that same survey by The Penny Hoarder, despite the fact that a surprising number of respondents felt budgeting was unnecessary, those who did keep a budget were not only more likely to know how much they spent last month, but were also less likely to say they had splurged on something that made it more difficult to pay their bills.
The bottom line: While you may feel down in the dumps about your current situation, if you’re taking steps to change your money mindset and get your spending on track, you’re already ahead of the game.
And—some more good news—budgeting doesn’t have to be a painful process full of deprivation. “Take time to step back and consider your relationship with money,” says Kathy Entwistle, founder of The Money Date Box. “Understanding your history with spending is necessary to be comfortable in the long run,” she explains.
After a bit of reflection, it’s time to take action. Compare your income against your expenses. Does what you take home cover what you need to pay out? The goal is to have a surplus of funds you can use to pay down debts and save for future needs. If you find yourself facing a deficit, this is the most important time to button up your budget and look for ways to trim the fat.
Make a list of each individual expense—both fixed (recurring costs like your rent payment) and variable (groceries or entertainment, for example). What costs do you need to maintain in order to keep up with your desired lifestyle? Which ones can be reduced or even temporarily suspended?
You should see some clear lines, but if you’re struggling, financial experts recommend starting with the following:
1. Recurring subscriptions
That recurring HBO charge or your Peloton subscription may feel non-negotiable, but there are typically a few items here and there that can be eliminated or, at the very least, restructured. Look over your credit card bill, and make a list of any subscriptions you currently have. Then ask yourself: How often do I use this? If the answer is infrequently or never, ask yourself a second question: Do I really need this? If the answer is no, go ahead and cancel your subscription. If you’re on the fence, see if there’s a way you can downgrade your current plan to save a few bucks. For example, you could opt for the slightly-less-expensive streaming plan that includes commercials instead of the premium ad-free plan.
2. Switch policies
You should also consider taking a hard look at bills. Homeowners and auto policies are a great place to start. Chances are these plans have been on autopilot for a long time. But, typically, comparable policies can vary by hundreds of dollars, so it pays to shop around. Get quotes from competitors to see where you might be able to save. Even if you don’t make the switch, you may uncover potential discounts your current insurer provides that you’re not taking advantage of. Often, you can secure a discount for things like taking a defensive driving course or installing a monitoring device in your current vehicle.
The same applies for other service providers—like your cell phone, cable, or internet provider. If your bill is skyrocketing, make the call. Tell the rep in the billing department that you’re considering switching providers. More often than not, they’ll offer you some sort of discount to stay on as a customer.
3. Negotiate with creditors
While things like interest rates feel very fixed, there can be some wiggle room—particularly if you have an overall solid credit score. And you know what they say: It never hurts to ask. If you typically make on-time payments, but are facing a period of hardship, call your creditor to see if you can negotiate a lower interest rate or monthly minimum. At the very least, if you can’t make a minimum payment this month, give your lender a call to see if they can extend the deadline or waive the late fee as a one-time courtesy. This way, you’re less likely to do damage to your credit score for a short-term problem.
4. Get moving
Do you have a tendency to hop into an Uber instead of taking the train home? Or maybe you technically live walking distance to work, but default to the bus or subway? In NYC, a single subway ride costs $2.75. Multiply that by two, and you’re spending a minimum of $5.50 on transportation each day. If walking—or even biking—to work or activities with friends is possible, consider doing just that. It not only reduces the costs associated with commuting (good for your budget!), but is also better for the environment and your overall health.
5. Spend smarter
Don’t feel like you have to stop spending altogether, but do challenge yourself to think more creatively about what you’re spending your money on and how you’re making each purchase. When shopping online, use tools like price comparison sites (Pricegrabber, for example), coupon codes, and browser extensions like Rakuten that offer cash back at over 2,500 stores. You can even buy unused, and heavily discounted, gift cards on a site like eBay or Card Cash to use at your favorite retailers. And of course, try to wait for major sales—especially for big ticket items—that usually happen around major holidays, like Memorial Day, 4th of July, and Black Friday. Sure, you’ll have to plan a little bit, but shopping strategically will ultimately save a fair amount of money in the long run.