Creating a smart budget means spending where it counts — and saving where it doesn’t. “It’s not about being cheap. What we talk about is choice,” says Michael Gardon, contributor at the Simple Dollar, a personal finance blog with a focus on frugal living.
Try these spending strategies without sacrificing joy:
Start with a Personal Goal
Deciding how much you spend is easier if you have a goal in mind. Whether you’re looking to put aside money each month or planning ahead for early retirement, it’s important to be specific and honest with yourself about your own needs rather than following the suggestions of others.
Start brainstorming by writing down your top three financial goals. Once your intentions are clear, it’s easier to build a budget that fits your needs. “Being frugal is really about having a plan for your money,” says Holly Johnson, a personal finance blogger at clubthrifty.com.
Try a Zero-Sum Budget
When you’re ready to tackle your spending, Johnson recommends trying a zero-sum budget, where all of your monthly income is allocated at the beginning of each month. More importantly, any leftover money needs to be allotted to a savings account or emergency fund before you’ve had a chance to spend it on other things that crop up throughout the month.
“With a zero-sum budget, you spend all the money on paper at the beginning of the month, and it forces you to stick to a plan,” says Johnson, who tried the experiment with her husband, Greg. “We had a lightbulb moment — our dreams wouldn’t come true unless we made changes.”
Know Your Must-Haves
Whether you’re saving for a new pair of jeans or a Caribbean getaway, know your own limits of what you will not sacrifice in order to save, recommends Gardon. For some people that may mean paying for fast internet service but giving up costly cable service. “Understand your money as a tool,” he says. “That may mean spending more sometimes and saving more sometimes.”
Try a simple exercise to build a budget without sacrificing joy: Use a printout of your credit card statement to figure out what items or experiences you’re not willing to strike from your budget. Having a visual of your monthly spending habits may make it easier to understand what you’re willing to cut and what’s important to keep in your budget. “Being frugal doesn’t mean saying ‘no’ all the time,” says Gardon.
Weigh the Time Commitment
Don’t immediately select the cheapest option. In some instances (i.e., home repairs or nonstop flights), a consumer spends more money, rather than DIY, because of the time commitment involved, says Gardon. Another caveat: Some higher quality products such as home appliances could outlast their cheaper counterparts and save you both time and money on repairs in the long run. "You have to understand the time investment and your cost alternative to do something else,” he says.