Top 3 Budget Categories To Save Money On Today
When comes to getting yourself on a savings plan and budgeting properly, creating the budget is only the first step of the process. If you create a budget, but still spend money on whatever you want, whenever you want, you’re not going to make too much progress. We all know how easy it is get excited and inspired about making a change in our lives, but then two weeks later we find ourselves making the same decisions we had been making before. Managing your money is no different. We need to execute the process, but we also need stick to it and make changes as necessary. No matter who you are, all of us have changes that we could make to improve our financial situation, and these 3 budget categories are a great place to start:
Cook Instead of Eating Out
Enjoying a meal at a restaurant is wonderful experience. It’s a great way to connect with family and friends, enjoy well-prepared, unique foods and also leave the cooking and cleaning to someone else. I view food as one of the great pleasures in life that everyone should seek to enjoy, and it is also one of my favorite ways to connect with people. However, shoveling down a $12 burrito on your lunch break while scrolling through your smartphone is not what I would call a worthwhile food experience. And neither is eating take-out sushi for the second time this week because you didn’t go grocery shopping over the weekend.
Cooking most of your meals at home and saving visits to restaurants for weekends and special occasions is one of the easiest (and healthiest!) ways to save money. Let’s estimate that the average cost for going out to lunch during the workweek is about $10-15 meal, depending on where you live and what you are eating. We’ll assume you’re not eating off the dollar menu for every meal. And the cost of going out to dinner is about $15-20 per meal. Larger dinner items are typically more expensive, and factoring in the cost of tipping, drinks and whatever else is ordered with the meal it ends up being a bit more.
Cooking a meal at home typically costs anywhere from $3-10 per meal, and the range is larger based on what you are eating. If meat or fish is at the center of the meal, then it will cost closer to $7-10, but if you enjoy beans/rice and salads then you can eat for more like $3-5. The cost will vary greatly on your diet, but either way, it’s almost always cheaper to cook than eat out.
Here are a few rough numbers for you:
Cost of Dinner Eating Out: $15 per meal x 7 meals per week x 52 weeks per year = $5,460
Cost of Dinner Cooking: $5 per meal x 7 meals per week x 52 weeks per year = $1,820
For a difference of $3,640
Lunch at $12 per meal (eating out) vs. $3 per meal (cooking): $4,368 vs. $1,092 or a difference of $3,276
So for 1 year if you cooked all your meals at home instead of eating out, you could save $6,916 or more per person in your household.
I’ll be writing a post on some delicious and cheap meals to cook at home, so be ready for some recipes!
Pay Off Debt ASAP
This one can be kept pretty short and sweet. Here are the average interest rates for different types of debt:
Student Loans: 5-6%
Credit Cards: 15-20%
Car Payment: 4-5%
The amount of money paid in interest on debt can be absolutely shocking. It’s completely understandable that debt is sometimes necessary. Pursuing a career in a field you enjoy, buying a home or purchasing your first car are events that are necessary and/or rewarding, however, it is still advantageous to be smart about how much debt you take on at one time and also be aware of how quickly you pay it off.
For example, if you have $30,000 in student loan debt with a 6% interest rate when you finish school, the difference in interest paid varies greatly with how quickly you pay it back:
Principal and interest paid back in 5 years: $34,800
Principal and interest paid back in 15 years: $45,568
That’s $10,768 that could be saved by paying back the debt faster. It doesn’t matter what type of debt you have, you can maximize money saved by paying it back as quickly as possible.
Do Your Shopping Only Once or Twice Per Year
As much as I say I’m not a shopper and am not into electronics or the latest fashion trends, it can still be tempting to want to buy just that one new clothing item or latest tech gadget that I think I need. I’m really into fitness and staying in shape, so when my old Fitbit broke (given to me as a gift) I was so tempted to buy the new Fitbit Charge 2 for $150. The cost was nothing compared to an Apple Watch, and I always used my other one so I thought that I needed it. However, after some internal deliberation I decided to wait a few weeks and see if I still wanted it. That was almost 6 months ago, and I’ve basically forgotten about it now.
If you buy the latest gadget for a few hundred dollars whenever it comes out, spend a few hundred on new clothing items at the beginning of every season or even just buy something once per month in the clothing/electronics department, the cost will add of quick. A few hundred dollars a month could easily add up to $2500-$5000 per year.
My advice is this: Only buy clothes or electronics ONCE per year
Keep a running list of what you want/need (new pair of shoes, clothes for work, latest video game system), and when you get to the your set date (I recommend the beginning of summer because it’s the furthest from the Holidays), go out and buy what you want. You likely won’t want to buy $3000-4000 worth of stuff in one week, and you also will probably change your mind about half the stuff you wanted earlier in the year. This will inevitably keep your spending down. Give a shot and see how it works!
There are many other spending categories where improvements can be made, but these are a few of the ones where making changes is easiest. Would love to hear your thoughts on how to save money in these categories, so leave a comment or send me an email!