I am not using myself as an example because I do not have a steady income and my expenses are not very controlled because I don’t really need to control them as long as I don’t give in to my penchant all the time for expensive $2000 coats.

(It’s the truth!)

WANT MORE MONEY? YOU HAVE 3 OPTIONS:

1. Make more money
2. Cut back in your budget
3. Suck it up and deal with your situation

SOME REASONS WHY YOU’D CUT BACK ON YOUR BUDGET

• You want to clear your debt faster
• You want to save money for a life event — travel, wedding, home, baby..
• You want to stop wasting money because you feel like it’s out of control
• You want to retire early and stop working for The Man so you need to reach a certain goal beforehand
• You are living paycheck to paycheck and feeling pinched every month

Sound familiar? Read on, there are only 2 steps.

STEP 1: CUT BACK ON FIXED EXPENSES

Fixed expenses are amounts you have to pay each and every month, like rent for instance.

The best place to save money, is to start cutting back on how much money HAS to go out of your pocket each month.

Once you lower how much money is forced out of your pocket each month, you are already ahead of the game without having to cut back on the other stuff that is trickier to manage like food.

I’ve listed the common money draining culprits with some options.

Some are going to sound drastic, others are going to sound silly and ridiculous but they ALL work because I am not making this stuff up — I have heard other people doing it and/or have done it myself.

RENT

• Move to cheaper dwellings (in another neighbourhood for instance)
• Move to a smaller apartment
• Get a roommate to start splitting expenses
• Get a side job house-sitting where you basically watch peoples’ houses while they’re out of town

CELLPHONE / TELEPHONE

• Get rid of your cellphone
• Get a cheaper cellphone (e.g. not a smartphone, just a regular flip phone for calls)
• Lower your cellphone plan to something more moderate / basic
• Get rid of your data / wireless plan
• See if your company lets you expense all or some cellphone usage if you use it for work

TELEVISION

• Get rid of your television package
• Watch TV online instead
• Watch TV when you hang out with friends (e.g. You all get together and watch The Bachelor)
• Read instead

INTERNET

• Use the internet at work / library / cafes instead during your breaks or lunch hour
• Get a cheaper internet plan (do you really need unlimited data usage at uber fast speeds?)
• Use the internet on your smartphone instead by tethering the smartphone to become a wifi hotspot

CAR LOAN

• Sell the car completely and cut your losses
• See if you can get a cheaper loan somewhere to pay off the car with it, then clear the loan instead
• Take public transportation if you can — even without a car loan it saves on insurance, gas, parking, etc

STEP 2: CUT BACK ON UNNECESSARY VARIABLE SPENDING

What do you consider unnecessary? It’s really up to you to decide, but for every decision you make, there are consequences.

If you don’t want to cut back in one area, you have to cut back in another.

You can’t have it all.

I know what I personally consider necessary:

• Food (Groceries only, not talking about Eating Out or Beer)
• Utilities
• Household supplies
• Internet
• Basic Cellphone (no data or wireless plan, about $25/month)
• A little entertainment budget (you will go stir crazy if you only do free stuff)

Otherwise, it’s all pretty much extra and unneeded. I know this.

FOOD (GROCERIES)

This is the last place I cut on the budget. I am a big believer in good food and will sacrifice in other areas if need be.

• Eat less meat — It really does make a big difference in your budget
• Eat less in general — Are you snacking because you’re bored rather than actually hungry?
• Buy more raw vegetables and fruits rather than processed, frozen or pre-packaged stuff

UTILITIES

• We went from spending $50 a month in electricity to $10 month once, just by turning off lights/electronics
• Use less heat and wear a sweater in the house instead; don’t need to wear a winter coat, but don’t wear shorts

HOUSEHOLD SUPPLIES

Honestly I am stumped on this one because we don’t spend a lot here, but here’s what we do and what I think people do:

• Use white vinegar, baking soda and good ol’ soap, even soapnuts. It cleans everything.
• Don’t buy commercial cleaners at all and use those 3 items above.
• Don’t buy hand sanitizers or air fresheners — do you really need that stuff? FDA says no.
• Use reusable towels instead of paper towels all the time — a real waste

DINING / EATING OUT

I’d classify this under “Entertainment”, rather than an actual category that should be allowed. When I go out to eat with friends, it’s entertainment to me. Otherwise, I don’t eat out for the sake of eating out.

• Go out once every 2 weeks for a coffee with a friend and put it under “entertainment / coffee / dining”
• Go out to cheaper places like a burrito joint instead of a sit-down restaurant

ALCOHOL

• Stop drinking or drink less. Treat it like a treat, not a necessity after work.

SPORTS / GYM

I am not into sports but I do enjoy yoga classes.

If I had to, I’d call this unnecessary because you can practice yoga at home, walk, run, and bike pretty much for free without needing to go to the gym or join a league.

• Do yoga at home — you can Google any yoga position and do it yourself in your living room
• Walk / Run / Bike outside
• Pick a cheaper sport to play — instead of hockey for instance, where it requires equipment & rinks

CUTTING BACK IN A TYPICAL BUDGET

So let’s take a hypothetical made-up budget from real people like this couple with four children.

I chose them because they spend every penny they make and seem to feel like they’re on a tight budget and even have debt to boot.

“We are treading financial water at best with the threat of sinking always impending,” Francesca writes in an e-mail.

NET INCOME: $5,930

EXPENSES: $5,930*

*Let’s ignore for a moment that this number actually adds up to $4460 a month and not $5930 a month.

There seems to be about $17,640 in net income floating / lost somewhere in those numbers above.

Fixed costs and regular monthly payments: $2625

• Property taxes $275
• Hydro $130
• Her life and critical illness insurance $55
• Mortgage $1,020
• RESP $300
• Property insurance $195
• Netflix, newspapers $50
• Line of credit $200
• Telecom, Internet, cellphones $210
• Piano lessons $45
• Bank fees $10
• Nursery school $135

Basic monthly costs: $1505

• Groceries and cleaning supplies $1,000
• Vitamins $10
• Takeout coffee $20
• Dining out, entertainment, spirits $450
• Babysitting $25

Lump-sum and annual expenses: $1,800

Liabilities (Debt): $268,000

• Mortgage $233,000 at 3.7 per cent
• $35,000 line of credit at 3.5 per cent

It looks like this:

THE ABOVE ADVICE APPLIED TO THE TYPICAL BUDGET

Note: This is what I would do if I were faced with this budget.

You may think differently but that’s why we’re different.

WHY DID I CHOP OUT EDUCATION SAVINGS?

You are wondering why I chopped out the RESP plan for the children’s education even though it could TECHNICALLY rollover into an RRSP (your retirement plan) if you have room available and your kids don’t use it.

This is because even though the government gives you a matching grant each year, you can catch up on contributions later once your debt is done, and still get that nice grant.

First, getting rid of the debt is #1 — they’re trying to save money for something that is not necessary NOW, when they’re bleeding elsewhere.

Second, it’s because I am a firm believer in taking care of your personal situation first before helping others, even above your children or charities.

• Read: Why I won’t be paying for my kids’ college education

You can’t be guaranteed that your children will actually use that money, and if your own finances are in a precarious mess, who is going to take care of you?

Not your children of course.

Help them by loving them, feeding them and taking care of them, but for education they can always take out student loans (which will make them think twice about going to college without really thinking it through).

 

I PREFER THE TIMELINE OF SHAVING ABOUT 11 YEARS OFF MY DEBT REPAYMENT

If they are currently putting $200 a month towards their $35,000 line of credit with a 3.5% interest rate, they will be out of that debt in approximately 14 years.

Which sounds better to you?

Grinding through a nasty life for 3.5 years and then having a great surplus of about $855 to pay a little more towards their mortgage and help their kids?

Or living this paycheque-to-paycheque lifestyle for 14 years, feeling like it’s never enough?

I know which life I’d choose, even if it’s disgusting and nasty in the beginning. I’ll be able to see the end goal.

Otherwise, I’d be trying to make more money.

YOUR PRIORITIES MIGHT BE COMPLETELY WRONG

I could talk myself blue into the face but it really boils down to priorities.

If you are spending $450 a month on entertainment like that couple above, but (sort of) complaining that you can’t seem to get ahead, your priorities are all wrong especially if you bleat to me that you care about saving for your kids.

I can understand $100 – $200 a month on entertainment especially with 4 children, but not if you don’t have a secure retirement, your debt is still outstanding and significant, and you talk a good game about saving for their education.

THINK about your priorities. What is REALLY important to you in life?

Your children?

Then you should be spending there and saving for them.

(Piano lessons are not a necessity. Trust me, I took them my whole life but it was a hobby, not a need.)

Your retirement?

Then you should be saving there.

Getting out of debt?

Then your debt repayments should be at the maximum they can be.

DON’T REALLY KNOW WHAT YOU ARE SPENDING TO BEGIN WITH?

Start a budget, and start tracking your expenses.

Without data, you can’t analyze where your money is disappearing.

Without analysis, you can’t make changes to your budget and pay off your debt faster or save more money.

DON’T WANT TO CUT THE BUDGET ANYWHERE?

Fine, then make more money.

Pick up a second, part-time job at nights or on the weekends.

Start freelancing on the side — babysitting or tutoring for instance!

Whatever you decide to do, you have to make more money and it means working more.

Don’t like that option either? Then suck it up and live with the situation that you have.

You really don’t have a choice — you can either cut back or make more money.

CAN’T REALLY CUT THE BUDGET ANYWHERE?

You’ve read the entire post and you really still feel like you can’t cut back anywhere.

Literally, CANNOT.

Then I direct you to the same answer above: Make more money or Suck it up.

WANT TO READ MORE ON THIS SUBJECT OF BUDGETING?

Start here:

• How do I create a budget?
• What is an ideal household budgeting for spending?
• Flip Flop Budgeting: For those who hate to budget
• How to cut your own budget and handle it wisely
• The Cosby Show: Teaching you about budgeting and life