Popular option has suggested that the US government needs to cut the "pork" with regards to the wasteful spending that has come to light in the most recent omnibus spending bill. The truth is, as an average individual, there is only so much we can do to change government spending decisions. But what we can do is manage our own personal spending.
Here are some ways you can cut the pork from your own personal budget:
The first thing you need to do is to have a good idea about where your money is going. You can't cut the "pork" if you don't know where it is.
Personally I have always maintained by own spreadsheets, but there are many apps out there that you can use and even link to your bank account. Most banks also help you automatically track and categorize your spending activities when you use your credit or debit card.
Before you plan out how much you want to spend, first set a goal on how much you want to save instead! And don't be afraid to set a more aggressive savings target (you can always amend this later). A "side effect" of setting a goal for your savings first is that it allows you to really think about what you can cut out as you plan out your spending.
An emergency fund is money set aside in case of loss of income (job loss) or an unexpected emergency expense (medical emergency). You should have an emergency fund set aside to cover between 3 and 6 months of your spending needs. This should be very liquid money such as an easily accessible savings account. Find out where your emergency fund ranks in terms of your liquidity tier list.
All good savings plans requires some sort of investing for the long term. This is money that you are deciding to set aside and will not be using at all for your every day needs. This does not mean you shouldn't be touching your money at all because you do want to be able to take advantage of investment opportunities that come your way. You do want to manage within your investment portfolio, but that will be a topic for another day. For now, set a goal to how much of your income you want to put into your long term investment portfolio.
Outside of your emergency fund and your long term investments, you may have some sizable expenditures you saving up to within the medium term. These are savings that are expected to be depleted within 3 months to 1 year. Some examples are savings towards an upcoming vacation or towards a new car purchase. Although this is money not going into your investment portfolio, it is important to understand that it should also be money set aside on top of your emergency fund.
Once you have accounted for where all your money has been going, the first thing you can do is identify what expenses are you paying for but not using.
Are you subscribed to a magazine that you never read? Or have you been buying up too much novelty items that only served to clutter up your living space? These are easily identifiable expenses that aren't providing you any benefit that you can cut out going forward.
If you are subscribed to 3 different streaming services and only watching one or two movies a month, take the first step to cancel two of them. Once you do, you will start feeling much better as you are already making progress and the next steps will start feeling easier!
Project what each necessary item is going to cost you. How much will you be spending on rent, food and transportation? How much are your monthly phone, internet and utility bills? What are you spending on cleaning, maintenance and health products?
Once you have your necessities down, then you can determine how it compares to your savings goals and where you can cut down. Remember that even with your necessities, sometimes you might find room for cost cutting? I recently changed internet providers because I noticed that people are getting much better prices for their service elsewhere.
Don't be afraid to challenge yourself to beat your savings targets by cutting out unnecessary miscellaneous expenses.
Finally, look at what changed last year, such as our spending habits. For those lucky enough to still be working from home, you might have realized you have been saving quite a bit over the course of the year on things you would usually be buying. And for those who unfortunately are still struggling during these times, cutting back has been all but a necessity. I want everyone to notice that, you have survived without all those items we have taken for granted before, and not only that, you have had a year to develop (or eliminate) certain spending habits:
Take time to reflect on the things you realized that are not staples in your life, and realize that you managed to go a whole year without them. When we get back to business as usual again, don't immediately jump back in full swing.
You already managed to go a whole year without so many things, and look at how much you saved because of it! Keep it up, because there is a lot more "pork" than we sometimes realize.
