When money troubles hit, most entrepreneurs assume that they need to drastically improve their income. But reducing household expenses can have just the same effect. After all, a dollar saved is just as good as a dollar earned.
5 Tips to Live on Less
You don’t need a six-figure income to live a comfortable life. As you wait for your business to grow – or for the next creative idea to come your way – try cultivating these money-savvy habits:
1. Master Consumer Psychology
Most money troubles aren’t the result of low income. Instead, most financial issues are the direct result of poor psychology. In particular, most Americans don’t understand the difference between a need and a want.
In reality, there are only four things you actually need to survive: food and water, a roof over your head, basic healthcare and hygiene products, and clothing to keep you warm. Anything beyond these four categories – or even excess within one of these categories – is a want.
“Does that mean that you should only buy the things that you need? Not at all. Life is meant to be lived, not survived,” personal finance expert Erin Huffstelter explains. “Treat yourself to some wants along the way, but do so when you can afford to, and enjoy those wants as the extras that they are.”
At the moment, you aren’t in a state where you can afford to indulge in too many wants. Your primary focus is on meeting the basics. Then, if you happen to have some extra cash, you can spend on the occasional want (within means).
2. Slash Recurring Expenses
Monthly recurring expenses are a drain on your budget. While some are necessary – such as a mortgage or electric bill – others aren’t. Get rid of the ones that don’t offer tangible value.
3. Reorganize Expenses
Shuffle around some expenses to create more margin in your budget. If you’re a homeowner, it’s smart to take a look at your mortgage and see if there’s anything you can do to lower your interest rate. Refinancing your mortgage could potentially save you thousands of dollars per year. If you’re aggressively contributing to your two-year-old’s college savings plan, you’re probably better off freezing additional contributions and reallocating this money to pay down debt or build up an emergency fund.
Think through every expense category in your budget and look for creative ways to reorganize or reduce spending. You’ll be surprised by how much flexibility you have.
4. Eat for Less
If there’s on expense category where most people are atrocious at managing their money, it’s food. Whether it’s groceries or eating out, most people spend two- or three-times the amount they actually should.
For groceries, develop a weekly budget. Meal-plan and create a shopping list before visiting the store. Use a calculator to add up how much you’re spending as you put items in the cart. Before checking out, calculate the final amount and put back anything that puts you over your budgeted amount.
As for eating out, you should only do so three or four times per month. It’s a big waste of money and could potentially be costing you hundreds of dollars every single month. Learn to love cooking. Pack your own lunches and don’t get pressured into eating out every single time a friend makes the suggestion.
5. Sell Something
Do you have anything you can sell to make some extra money and build up your cash savings account? For example, maybe your family has two cars, but both you and your spouse work from home. Could you sell one of the vehicles and use the money to fund other basic needs? It’s worth a thought.
Cheap vs. Savvy
Nobody wants to be called “cheap.” The word is typically applied in a negative connotation and is used to describe someone who pinches pennies at the expense of comfort and common sense. But there’s a difference between being cheap and savvy.
A savvy spender is someone who is conscientious enough to avoid wasting money on useless purchases. They only spend money on items that are necessary and/or purchases that add value to their life.
As an entrepreneur attempting to make ends meet, you should never let someone bring you down for being a savvy spender. It’s your money, your life, and your family. People look down upon discipline because they can’t muster up the courage to face their own lack of self-restraint. In three, five, or 10 years, you’ll be the one living large.