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The Temporary Cutback

In the course of life, there will be events that require a reduction of expenses in order to bridge a period of time. This could happen for a number of reasons, including such things as:

• Job loss
• Demotion
• A large, unexpected expense
• Saving for a short-term goal
• Paying off a debt
• Starting or purchasing a business

While this might require a cutback to the absolute bare minimum, it may not require such a dramatic shift as that. Depending on the situation, you may find yourself still with enough of a surplus at the end of the month to save into your emergency fund and enjoy some discretionary spending.

We have covered the bare minimum budget in another article, but here we will dive into some discretionary spending items in order to prioritize them and customize them to meet your individual tastes.

As a refresher, the bare minimum budget often includes the following:

• Food
• Clothes
• Toiletries
• Mortgage / rent
• Utilities
• Phone
• Internet
• Gas
• Insurance (health, home, auto, life, disability)
• Medications (if applicable)

This alone is a very difficult budget to live by on a long-term basis, and in fact should be perceived as a short-term solution until earnings can be improved.

But a mid-term situation can be imagined where you can afford more than the minimum, but you still need to pay attention to the outgoing expenses if you want to ensure that spending remains within your capabilities. As this is a very common situation, here are some additional categories to consider:

• Dining out
• Coffee on the go
• Streaming services or other monthly subscriptions
• Private school / homeschool
• Home décor / appliances
• Personal care (hair, nails, massage, spa, etc.)
• Gym / pool membership
• Hobbies
• Pets
• Holidays
• Vacations
• Charitable gifts
• Retirement savings

Leave Room for the Unexpected

One-time expenses such as a car maintenance issue, a medical expense, a home repair, etc. cannot be predicted specifically, but it can be expected that something will regularly require a surprise payment that was not in the budget.

The odds of an unplanned expense are too great to ignore.

Therefore, some degree of setback account should be established. It’s ideal to keep this account separate from the main spending account to make sure that it is not intermingled and lost.

For example, someone might maintain a checking account for the predictable monthly expenses and do an automatic cash sweep to a money market account to build up an emergency fund. This will be their go-to fund when the unexpected happens.

This same method can be followed when saving for holidays or vacations.

Take some time to think through the details of what you’ve recently been spending in each of these categories listed above, and then do your best to rank them in order of importance to your continued enjoyment of daily life.

• Which of these “wants” are the strongest?
• Which categories are replaceable with some other free activity?
• Is there a way to reduce the expense if you can’t eliminate it entirely, such as making your own coffee at home?

Alternatively, which activities feel integral to your motivation and enjoyment of life? These may be near the top of your priority list, and these are the ones you want to try to save if you can.

Once you have placed a number on each one (and added any categories which apply to you more specifically), take a look at those last on the list and consider. Are there some categories that could temporarily be cut out altogether? Which ones could be reduced but not eliminated? Which ones are you most adamant about maintaining in full swing?

For the ones that you intend to eliminate or reduce, list a free or low-cost activity that could potentially take its place. For example, if you choose to cut a streaming service, you don’t want to find yourself in a void when you come home from work and want to watch a relaxing show. Is there another hobby you could take up, such as investing in some board games or diving into some good books from the library?

A Unified Household Goal

If you share expenses with a family member or friend, are they on the same page as you when it comes to budgeting? Does the need to say “no” to certain wants strike fear or despair into your heart or theirs? If it does, it’s probably because the person doesn’t see the full picture. Have open discussions free of judgment, where anyone is allowed to ask questions and dream together. Make sure it is understood that this is a temporary way of living, but that there is a solid plan in place by which you will all move to higher ground as you implement the principles of wealth building day by day.

Taking the agricultural concept of sowing and reaping, remember that the farmer does not sow indefinitely for years on end without a harvest. Remember that the harvest always comes. Sometimes it may be great, sometimes it may be sparse, but consistency and faithfulness to a specific plan will guide you to a time when you will reap the harvest you have sown.

And it is important to know when that time has come, because improving your lifestyle when it makes sense to do so can reinforce psychologically in your mind that you can make progress, and the things which you set your mind to do will come to pass. In that triumphal moment you can set your sights on the next mountain peak!

Conclusion

Riches, of course, do not only consist in material things or money. A rich life is one that is lived in such a way that one balances the present with the future, living each day with the honor that the present deserves while making small but habitual sacrifices to ensure and improve the future.

More than following a set of rules, a budget gives you the chance to reevaluate what is most important in your life. Beyond the basic survival needs, this act of examining and prioritizing your wants opens the door to a growth in perspective. It can be eye-opening when you add up little expenses that seemed insignificant in the moment, and you realize how dispensable such small purchases really are. These often come in the form of impulse buys, or just simply habits that have never been closely examined.

With just a few differences in decision-making each day, it usually takes very little to balance a budget with a middle-of-the-road income, and the resulting surplus you can set back for those rich experiences that come with travel, holidays, entertainment and even charitable giving or missions.

The small sacrifices in the moment will pale in comparison to the doors that a surplus budget will open up for you.