Do you maintain a household budget? Everyone should, but only one-third of Americans actually keep a formal budget. Not only is the purpose of maintaining a household budget to track where your paycheck goes each month, but it’s also to help you save money. As soon as you start tracking where your money goes, you can start to identify spending patterns, including areas where you may be overspending. You can even find ways to save money on necessities such as food, utilities, and transportation.
You can always find ways to save money, no matter how you structure your budget. In fact, Americans waste a lot of money. Consider that nearly 40% of millennials overspend in order to keep up with their friends, according to a Credit Karma survey, and two-thirds feel remorse for spending more than they could afford in social situations. Also consider that 85% of Americans are actively trying to decrease their debt and 74% are carrying credit card debt. If you can find ways to save on necessities, then that’s money you can put toward things you would rather put it toward, or paying down your debt.
The best place to start is by creating a budget and organizing it as a list of necessary expenses and discretionary spending. As soon as you start to identify where your money goes, you can take a hard look at ways to cut costs.
Many of those necessities in your budget have variable costs, such as food and utilities. Before you can determine if you are saving money, you need to create an average monthly expense so that you can create a baseline against which you can measure savings. Monitor your expenses for a few months and average out monthly expenses for household necessities. Now you can start thinking of ways to save.
This is one of the most obvious areas where you can save and the trickiest. You don’t have to give up the foods you love, or even shop for less expensive brands (although that helps), but you do need to be mindful of your grocery spending.
Utility costs are typically based on consumption, so if you can cut down on what you use you can lower your utility bills.
Whether you are commuting to work or just running errands around town, there are ways you can save on transportation.
How you pay your bills can also help you save money. By using the right types of credit cards and bank accounts, you can save or earn money back on purchases.
One way to manage your food shopping is to use the same credit card to pay for all your groceries. If you choose a card that offers cash back, you can earn cash on your grocery spending and see all your food expenses in one place. Just be sure that you pay off your grocery spending each month, or you will defeat the purpose of saving by accumulating credit card debt.
You can also look for bank accounts that give you cash back. iQ Credit Union’s Easy Saver program, for example, rounds debit card transactions up to the nearest dollar and deposits the difference in your savings account so that every time you make a purchase with a debit card, you make money. And you can use your debit card like a credit card to pay bills online.
Mastering the basics of money management makes it easier to save money on all your expenses, including your monthly necessities. Start by establishing a baseline for your household spending so you can track your progress as you try new money-saving strategies. To help you get started, use our handy Budgeting Checklist to help you determine where your money goes. As soon as you have a comprehensive household budget, you can start to save.