After covering basic expenses like rent or mortgage payments, car payments, groceries, utilities, and so on, it can be hard to cut back on more fun discretionary spending such as going out to eat or buying the latest video game. However, by budgeting your spending, you can still enjoy what you love while also cutting back on extraneous costs. Here are some tips to improve your discretionary spending budget:
Prioritize Certain Entertainment Costs
Entertainment purchases are typically the largest recurring discretionary spending costs. Streaming services like Netflix and Hulu might be considered necessary to some, but in order to budget effectively, these costs must be offset by cutting another entertainment cost.
It can be beneficial to set one price for your entire entertainment budget — including thing like streaming services, music, games, books, and movies — and then only buy as many services that fit into that price.
You can also choose instead to break down your entertainment budget by having separate allocations for television, books, and so on, but with lower individual costs for each category. This method can help you identify your priority spending — for example, if you would rather spend more on streaming services than books — and ultimately help you save money on your less important wants. Analyzing your spending habits can help you adjust your budget to better match your priorities over time.
Reduce Your Personal Expenses
Personal expenses include immediate costs like clothing, gym memberships, cosmetics, haircuts, and so on. You can save money on clothes by purchasing from wholesale or discount department stores, such as Ross or Marshalls. And while gym memberships are a great way to stay healthy and lose weight, it is important to take advantage of them frequently or else it would be more cost-effective to work out at home. If you are the type who struggles to lose weight, contacting professionals can be a big help. Medical costs are very expensive, so it is always a good investment to take care of your physical and mental health before health emergencies occur.
Don’t Forget Savings
Budgeting for savings is a great way to build wealth over time. If your budget is tight, you can start with lower savings amounts at first and then increase them later. However, it is important to note that compound interest from savings accounts is most powerful when started early, so the earlier you can start saving, the better. Typically, a good rule of thumb is to save 20% of your income each month, but note that this applies after your necessary expenses have already been paid. You can increase this number as your salary grows over time to maximize your results.
Overall, it can be difficult to budget your discretionary income for non-essential expenses such as entertainment, but it is necessary in order to save money and grow your wealth over time. Prioritizing the costs most important to you, investing in your health, and following a consistent savings plan can help you budget effectively.
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