You may have learned that you enjoyed going to the beach more than flying on vacation with your toddlers. Maybe after a busy day ordering a few more nights a week was a lifesaver. You may want to keep contributing to a charity that you came across.
“As we head into 2021, we can use this information to turn our budget into a template that prioritizes the expenses we enjoy most,” said Kevin Mahoney, a Washington, DC-based financial planner who focused on Millennial money issues focused. “And we can continue to minimize or forego the expenditures that we can forego by redirecting them to higher value uses instead.”
When you make room for the items you like, you end up spending less on what you don’t need.
Assign your expenses.
The idea of a “budgeting system” can sound off-putting or intimidating to even the best-intentioned people. Use a strategy that suits your tastes to reduce the benefit.
For example, households took their paychecks and divided the money into envelopes for specific purposes (groceries, mortgages, insurance). The point was to make the most of every dollar once you got it, and not to spend too much.
However, such care can be exhausting, causing others to improvise. One saver interviewed in a 1959 book titled “Working Woman: Her Personality, World, and Lifestyle” described her “stupid little system” of breaking her husband’s paycheck into two piles: one for groceries (the went into a kitchen) drawer) and one for everything else (which went into a tin can).
Envelopes and tin cans are all but obsolete as saving tools, but the principle still applies: you want to know where you are spending money so you don’t overdo it, but the plan should make sense to you.
There are many ways to explore. With most major cards, you can see how much you’ve spent on what on your account page. Free apps (like Mint) keep track of all expenses across all of your accounts as you spread your expenses out. You can also get creative and keep an expense journal for a month or two by documenting each transaction and subtracting it from the amount you expect for that particular month. Or toss your credit cards on the bedside table for a month and pay as much in cash as you can. Research shows you will spend less.