Lifestyle Tips for Living on a Budget
- brad06154
- May 29
- 11 min read
In this post:
Once you have created a budget and been working with it for a little while, you are likely to start asking yourself "Where can I cut back some expenses?". This post discusses some lifestyle budget tips that apply to most.
If you don't yet have a budget, you might want to check out:
and
House Payment (or Rent)
Buying a home is an involved topic - more than I am willing to tackle in this post. However, where you live can make or break you financially over time. I will call 2 significant items to your attention:
Don't pay more than 30% of your take home pay each month for your residence. Whether it is a house payment or rent, exceeding this amount will make other priorities difficult. 25% of take home pay is even better. Note: the banks will loan you enough that your house payment is 40% of your takehome pay.
If you own a home, make sure you are not paying PMI on top of your mortgage. PMI is insurance you are required to pay if you finance more than 80% of the value of your home. If you want to know more about PMI, check out this post: Getting Rid of PMI.
If you are currently violating one or more of these guidelines, please do not panic. Planning to move in the next month or two is probably unnecessary. It may take time (a year or more) for you to resolve these. You should be aware of them and moving in that direction.
Cars
National average new car price is approximately $50k. Here in central Texas, it is relevant to know that the average pickup truck is $70k (and 3/4 ton trucks are more). Many people can easily fund their entire retirement simply by making better choices in the car they drive. If that sounds far-fetched, check out the math in this post: "Would you rather have a Fancy Car or Fund Your Retirement".
The changes you need to make to save thousands every year you drive: Cars
Don't buy new cars. Buy a 3 year old used car. Cars lose close to 50% of their value in the first 3 years.
Pay cash for any car you buy. You will pay anywhere from 10 to 25% more for the car if you finance it. We are on a budget -- so use that budget to put away cash for your next car purchase.
Buy reliable cars. Consumer reports can help you choose a car with good reliability ratings. Low maintence costs and reliability are the most important characteristics for transportation. Fancy interiors all cost more to own.
Do your homework: Use consumer reports and other car buying guides to select more than one reliable car model. Look them up on Kelly Blue Book to determine which year models and options fit within your budget.
Give yourself time to make the purchase. It can take 3 months or more to find a good, clean, reliable used car. Assuming you will go buy a car over the weekend almost guarantees you will compromise on one or more things - including price. Plan ahead.
Buy from private parties. This approach comes with some risk, but is generally the most cost effective way to buy a car. You can get a quality used car for 10-20% less than through a dealer.
You are looking for a single owner vehicle with maintenance records.
Run a CARFAX or similar report to check for wrecks.
Pay a mechanic to look over the car and provide you a report.
If the seller still owes on the car, you can pay a 3rd party broker to make sure you obtain a clean title.
Negotiate a good price: If you have done your homework, have cash and have given yourself enought time - you will be able to negotiate a good price for your car. Be prepared to walk away.
Replace the car when it turns 10. Maintenance cost increases with time. While every car is different, maintenance costs tend to become more significant around 10 years or 150k miles.
You can save thousands per year and possibly millions in your lifetime just by making different choices about what you drive. If you are married - double those numbers.
Eating
One of the most variable lines in many budgets is the food line item – particularly when restaurants or fast food are part of the equation.
So here are the suggestions:
1. Stop eating out. This may sound drastic. Believe it or not, there was a time when people practically never ate out. No carry-out pizza, chick-fila or take-home Chinese. Austin food trucks are almost legendary. Sorry - you may be able to budget a meal or two a week at them. However, if you are serious about saving money, you will need to slow down on the quick lunches or picking up dinner on the way home.
2. Stop buying coffee/snacks during the day. Starbucks coffee and energy drinks from the convenience store really add up. I'm personally a coffee guy, so I understand. Buy a coffee maker, and a thermos or a travel mug. You can even grind your own high dollar coffee at home and still save. If a trip to the convenience store begins your work day -- this is another opportunity. Buy your gatorade or energy drinks in bulk and carry them with you in the morning.
3. Make a menu. Write down each meal for four days to a week at a time. If you will not be home for a meal, plan to make a meal to take with you. Having a plan not only reduces costs, but it actually makes everything more "efficient". You come home, look at the menu, pull out the ingredients and 30 minutes later -- dinner. Things are even easier if you make enough to have leftovers for lunch the next day.
4. Create a shopping list. Use your menu to create a shopping list. If you need to look up recipes – do that. Then take the list to your pantry and refrigerator to decide what you do and don’t need to buy. Go to HEB (or your local grocery store) and only buy what's on the list. After you have been doing this awhile, try organizing your list based on how your grocery store is laid out – this speeds up shopping. I have found an added benefit of this approach is that I eat not only cheaper, but healthier. I tend to stay out of the chips and soda aisles.
5. Only buy what’s on your list. Yes, I repeated myself. That's because it is important. No impulse purchases.
6. Eat what you put on your menu. This is a very important step. Prep the meals that you planned and eat the groceries you bought. There will be times when you are tempted to swing by the fast-food place on the way home because you just don’t feel like cooking. Don’t do it. If you do you will not only spend more for that meal, but you may wind up throwing out groceries at the end of the week.
I have seen families of four save $1,000 to $2,000 per month just by creating discipline around the above points.
Cell Phones:
Cell phone bills can be $200 a month or more. My bill is closer to $50 a month, and I have zero complaints about my phone or it's service. Here are some changes you might consider.
Stop financing the latest phone every two years. For the vast majority of us, a fancy cell phone is a vanity purchase. I understand they are great for creating videos and posts -- so if you have a justifiable business reason that you must be using the latest video and audio capabilities, just make sure your business income supports it. If we are honest with ourselves, most of us can do everything we have to do with a 3 year old phone. Generally speaking, you can buy a 3 year old phone outright for $300 cash. I carry my 3 year old phone for another 3 years or more, making it a $100/year expense or less.
Review and shop your plan. Individual plan requirements and coverages vary widely, and I am not a cell phone technical expert, so I will keep this simple. The big guys -- ATT, Verizon and T Mobile own their own networks, which means they can control priority bandwidth on those networks, and they charge a premium for that. Other carriers like US Mobile, Consumer Cellular, Mint and many others lease bandwidth on networks they do not own. They are significantly less expensive. Some will allow you to choose which network you are on based on your specific coverage needs. If you have a business reason for lightning speed data on your phone anywhere/anytime and can afford it -- no problem. If you are looking to save a little money, I have been using US Mobile at a significant savings for quite some time. When I must have data speed (which if I'm honest is almost never), I jump on my WiFi at home.
Individuals may save $150/month and a family even more.
Friends and Family (support budget lifestyle)
There is some quote about how we are the sum of the 5 people we spend the most time with.
I believe there is some truth in that. The people we are around the most influence the way we think and behave.
So, if you are trying to live your life on a budget – make better financial decisions and stay out of debt, doesn’t it make sense to hang around with people that do the same things?
A great start is with your current social circle. When they all want to go out on the town, suggest game night, or a picnic or something else that costs a tenth as much. Explain to those who will listen that you are trying to make changes in your life, and that you are now on a budget. Some may say something like “Sorry to hear that, we will miss you!” Some are likely to ask about the changes you’re making – or realize that they would benefit from curbing their spending as well. With any luck, some will come play a board game just because they are your friend.
It may take awhile, but if you stick with it your friend circle will begin to change. You might find you spend less time with some than you used to. You are likely to find some take a vested interest in your success with a budget – and may even make changes in the way they manage their money. If you remain consistent, you will eventually realize that the group of people you are spending the most time with are more supportive of your money choices than not—and that will make it so much easier to be successful.
Family can be a little more of a challenge. You don’t get to choose your family, but you can explain boundaries to them. When they request that you participate in things that are outside of your budget, it is ok to tell them that you would like to, but that your budget doesn’t cover it. They may complain or attempt to change your mind – just stick to your guns. They may take longer, but even family will eventually come around to understanding that you have other priorities for your money, and that time spent together is more important than expensive activities.
Making smart decisions about your money is nothing to be ashamed of. You should be proud of what you are doing. Draw some boundaries and stick to your priorities. Eventually, your real friends and your family will support you.
Holidays
Christmas is a wonderful season filled with family, friends and gift giving. Sometimes we can get caught up in the emotions of it all and put a real strain on our paycheck.
How many of us have opened the credit card bill in January and realized it will be months before we pay off the holidays? Here are some tips to prevent (or at least minimize) that holiday financial hangover:
1. Remember the reason for the season. This is a celebration of the birth of a baby. It is about people, relationships and gratitude – not material items, decorations or entertainment.
2. Shop with a Gift Plan. Make a list of everyone that you will be shopping for. Set a target budget for each gift, and strive to write down what you want to give them before getting online or stepping into a store. Prioritize your list and be willing to cut it down a little. You can make something in your kitchen as a gift for some. Fight the urge to go completely overboard with the kids. Focus on something you can do together rather than an expensive toy.
3. Create a Holiday Budget. Going into the holidays without knowing what expenses you intend to have is a recipe for a real January headache. Sit down and make a list of all your out of the ordinary holiday expenses and put a number to them. Your Holiday budget will probably include some of the following items:
Christmas Gifts
Travel
Decorations
Entertainment
Increase in Groceries
Create a budget for every line item. If you are married, make sure the plan is developed together.
4. Use Cash. It is way too easy to get into trouble using the plastic. It's painless until you see the result. Consider creating a cash envelope with your budgeted amount of money in it. You can remove cash for online purchases and put the cash back in the bank. This will serve as a reminder of how much you are spending along the way.
5. Plan for next year, If this is the first Christmas you've tried to manage a budget, it is likely to be a little bumpy. Between Christmas and New Year, before you have to go back to work, create a plan for next year based on how this holiday went. Decide how much money you would like to have set aside for the holidays and make a New Year's resolution to save money for Christmas so you will have it when the time comes.
If you would like to manage your money a little better next year, make a resolution now. Resolve to plan for your expenses, save for major purchases and goals, and keep a budget to make that all happen
Frequently Asked Questions
Having a reliable car is really important to me. Are used cars really reliable?
Some are. And some aren't. I am not a mechanic. However, I trust Consumer Reports. When they rank a car as in the top 3 reliable used cars, they are usually right. It has been my experience that such a car usually turns out to be more reliable at 3 years old than many new ones. It is possible of course to get a lemon - and that's true when you buy a new car as well. Taking the extra step of buying one with good maintenance records, and paying a mechanic a few hundred dollars to look it over has never gone wrong for me.
What if my house payment or rent is higher than 30% of my take home pay?
Like I said in the first paragraph of this post - Don't Panic. Especially if you are yourng, you have plenty of time to recover.
If you are in a house, take a little time and do some math first. Is it likely that you will increase your pay enough in the next 3 years to resolve the issue? Are you young enough that you have plenty of time to catch up on retirement and other things after that happens? If you are in a house can you get rid of PMI soon? For most people, selling a home and moving immediately is almost as expensive if not more expensive than "riding it out", Be aware of your situation, make decisions that slowly move you to a better percentage, and don't go back again.
If you are paying more than that in rent. Plan to move or get a roommate as soon as this lease is up.
Is all this really necessary? It sounds like you are asking me to give up all the things I like.
No it isn't necessary. Everything in this post is about choices.
If cars, phones and an expensive place to live are the things that make life worht living for you - then so be it.
It has been my experience that as people get older, maybe have kids to support or educate; or start thinking about how they are going to retire someday-- they begin looking for things they can stop doing because they realize kids or retirement (or some other goal) is more important to them than phones and cars. For them, it is helpful to have some ideas about where to look for some extra savings.
Brad Ormesher is the owner of Three Points Financial Coaching, and a Certified Financial Coach. You may schedule some time to speak with him (no obligation) using this button.
