Today we are keeping it light. The stock markets are a mess, morale is all over the place, so today we are talking budget targets and that’s it. Let’s get started!
Budget targets are a simple way to reach our goal of finding $500 a month to cut. Our budget targets will be focused on these categories:
- discretionary spending
- problem areas
Here’s how it works. You will use your budget spreadsheet from yesterday to identify your spending in each of these categories and then reduce by 10%. Now reducing by 10% on a monthly level is harder to track. That’s why we take it one step further and dived the monthly total by 4. This will give you very clear spending goals per week. Let’s get into it and it will make more sense.
Discretionary Spending, Stores, and Problem Areas
For the sake of this blog post I’m going to lump these altogether because the reality is there are blurry lines between them. The most important thing about these expenses is they are non-fixed. Meaning they aren’t your mortgage or a medical bill or your water bill. They can range from Target runs to Amazon Priming anything to pet expenses to non-holiday gifts for your grandkids. This kind of spending is a wildcard in your budget. Sure going to Target can be for an essential item like body wash, but spending $200 there isn’t essential. Many of these categories also tend to boil down to frequency. If you (used to) hit up Target weekly and hit ‘add to cart’ on Amazon several times a week, the frequency of purchases will add up.
For this challenge you can use last month as a guide and add up your totals in these categories. Your category can be specific to your budget. You may have a ‘grandkids expense account’ category or a ‘pet expenses’ category. Once you’ve added up your total, let’s say it’s $500, you’ll reduce that total by 10% for this month. Our new $450 total is a good goal but it can be hard to stick to over the course of the month, that’s why Pete likes to break this down to the weekly timeframe. With a weekly goal of $112.50 it’s much easier to gauge your spending at the pet store or Target or Amazon.
This is a simple exercise that can result in a good first step toward budgeting discipline. Bonus tip: whatever amount you reduce your spending by should go in your savings account! Don’t leave it in your checking account, it will get spent some other way.
For more personalized guidance don’t forget that a Hey Money expert is always ready and waiting to help you sort out this mess. Use code ‘cheese’ to get a 10% discount on a monthly subscription just for being a part of the 30 day recession-proof your life program. Stay strong!
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