Listen to the article
How do you maintain a spending plan when your bills are creeping up each month? Inflation is a normal part of our economy, and overall inflation is relatively average right now. But even normal inflation means that costs go up every year, and every year has some categories where those price increases can be steep.
Thankfully, the military pay charts have several pay bumps built right in: annual cost-of-living adjustments, promotion increases and time-in-service increases. But those pay changes donât always come at the same time as your bills increase. So, how do you keep your spending in line?
1. It Starts With a Spending Plan
The first step in managing your expenses is to actually have a spending plan. Whether you track broad categories or dig down into small details, some sort of plan for your money is essential to creating financial structure. Having a plan allows you to identify specific areas where you can adjust your spending, instead of making broad guesses like, âWe need to spend less.â Itâs much easier to accomplish something more specific like, âIâm going to cut back on eating lunches out.â
There are two main categories of spending: fixed expenses and variable expenses. Fixed expenses are the expenses that change cost infrequently: rent, auto insurance, student loan payments. Variable expenses can be controlled on a month-to-month basis. For example, food, entertainment and clothing are all variable expenses.
Read More:Â Start Preparing for the Next Government Shutdown Now, Before Itâs Too Late
2. Figure Out Where to Cut
When figuring out where to cut your spending, consider your values. Whatâs actually important to you in life? For example, if you value your friendships, then maybe you would rather cut back on clothing purchases so you can continue to do social activities with your friends. On the flip side, if education is a priority for you, then maybe you want to prioritize your childâs extracurricular activities over a nicer apartment.
Itâs easier to cut variable expenses in the short term, but making cuts to your fixed expenses pays off month after month. When fixed expenses can be changed, look there. If your lease is up, consider whether a less expensive apartment makes sense — after considering all the costs of moving! Small but permanent changes can be more impactful over time.
Two tips may help you make cuts to spending. First, consider whether you could decrease any category by just 5% or 10%. That can feel a lot more manageable than bigger cuts. For example, maybe instead of going out with friends every weekend, you invite them to your place one weekend a month. Itâs still not free to entertain, but itâs typically far cheaper than going out. Another tip is to consider whether you could make bigger cuts for a short term. For example, what if you cut your coffee habit in half for two months — what would that look like?
3. Be Realistic
Donât be over optimistic about your ability to decrease your spending. Update your spending plan with realistic numbers as utilities, insurance and other recurring bills increase. Reviewing several months of spending can help you see trends, such as higher food costs or adding a new entertainment subscription.
As my wise friend says, budget liberally, spend conservatively. It works out a lot better than building a bare-bones budget then consistently overspending.
Read More:Â How to Plan for an Extended Government Shutdown
4. Your Spending Plan Isnât Fixed
Itâs useful to think about your spending plan as a constantly changing system. Yes, youâll make major updates when life changes: PCS moves, pay increases, and paying off a debt. But day-to-day spending may change from month to month.
Tracking actual spending helps prevent gradual drift away from what youâve planned to spend. This allows you to either adjust your spending or adjust your spending plan.
5. Food: The Biggest Variable Expense
In most families, the biggest expense categories are housing, transportation, medical and food in no particular order. For service members and military families, health care costs are very low, so the big three are housing, transportation and food. Of these three categories, itâs harder to make changes to your housing and transportation budgets. But if thereâs room for wiggle, itâs usually in your food budget.
Your food budget usually has a couple of different parts: groceries for eating at home, actual meals out, and snacks and drinks that you pick up along the day. Each one of these parts usually has multiple ways to decrease spending.
For groceries, the three main steps are to plan your meals, to use whatâs already in your house, and to shop with a list of exactly what you need. Be sure to include snacks and easy-to-eat foods so you arenât tempted to order food or go out to eat. Once you get good at meal planning and shopping with a list, you can incorporate sale items and buy common ingredients in bulk when it truly makes sense. For example, I just picked up eight cans of diced green chilis that were more than half off the regular price. They are a staple of many of my recipes, so that made sense for me. Keep in mind when youâll move next to avoid overbuying!
For meals out, consider where youâd like to cut back. Most workspaces have a refrigerator and microwave to make it easy to bring lunch, especially if you have leftovers from dinner. Invite friends for dinner instead of going to a restaurant.
Snacks and drink purchases can be reduced by buying those items as groceries instead of from convenience stores or vending machines. For example, 12 packs of Coca-Cola cans are three for $13.99 at Walgreens near me this week. Thatâs under 40 cents a can, compared to $1.25 or more in a vending machine. If you drink two cokes a day, thatâs $51 saved per month. Astounding.
While not always as flexible, look at your recurring services such as subscriptions, and figure out how to pay down your debt. Both will make a big impact on your overall financial flexibility.
Planning and watching your spending is the only way to address constantly increasing costs. It takes a little time, but it reduces stress, decreases the chances youâll go further into debt, and helps position you for a positive financial future.
Get the Latest Financial Tips
Whether you’re trying to balance your budget, build up your credit, select a good life insurance program or are gearing up for a home purchase, Military.com has you covered. Subscribe to Military.com and get the latest military benefit updates and tips delivered straight to your inbox.
Story Continues
Read the full article here
12 Comments
The article’s suggestion to prioritize values when deciding where to cut spending resonates with me, as it’s essential to allocate resources towards what truly matters, whether that’s friendships, education, or personal development.
The article mentions that inflation is a normal part of our economy, but it’s interesting to note that even with average inflation, costs can still increase steeply in certain categories, making it essential to have a spending plan in place to manage expenses effectively.
The idea of making small but permanent changes to spending habits, as discussed in the article, is appealing because it seems more sustainable than attempting drastic cuts that may not be maintainable in the long term.
The distinction between fixed and variable expenses is crucial, as highlighted in the article, and I appreciate how it emphasizes the importance of identifying areas where spending can be adjusted, such as cutting back on eating lunches out.
Yes, and it’s also important to consider the long-term effects of these adjustments, like how cutting back on lunches out could lead to healthier eating habits and further cost savings.
The mention of military pay charts having built-in cost-of-living adjustments is reassuring, but it’s also important to remember that these adjustments may not always align with the timing of bill increases, making a proactive spending plan even more critical.
I’m skeptical about the feasibility of making significant cuts to fixed expenses, especially for those with limited flexibility in their budgets, and I wonder if the article could provide more strategies for managing these types of expenses.
One approach could be to negotiate with service providers, such as asking for a reduction in rent or seeking more competitive rates for insurance.
I’m curious about the 5% or 10% decrease in spending categories mentioned in the article, and how this small reduction can make a significant impact over time, especially when applied to fixed expenses like rent or auto insurance.
I appreciate the article’s emphasis on the importance of having a spending plan, as it allows for the identification of specific areas where adjustments can be made, rather than relying on broad, less effective strategies like simply trying to ‘spend less’.
The article’s approach to managing expenses by focusing on values and making targeted reductions seems like a balanced way to address the issue of bill creep from inflation, and I’m interested in implementing some of these strategies in my own budget.
Considering the impact of inflation on variable expenses like food and entertainment, it might be helpful to explore strategies for reducing these costs, such as meal planning or finding free local events, to mitigate the effects of bill creep.