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When caught in the middle of living paycheck to paycheck, the thought of saving money can seem like a fantasy far-removed from the present capabilities. Even if it were possible to save a small stash now and then, there always seems to be a catch: the unexpected “check engine” light, the hailstorm that totals the roof, the trip to the emergency room, or even a sudden job loss. Things like these can make it feel like one step forward is followed by two steps back. But take heart! Saving money is a journey worth taking, like a search for lost treasure.

Even the smallest change of habits can propel you to a financial future on another level of freedom: freedom of time and freedom of choice.

Understand the Goal

Track the last 3-6 months of your spending habits. If you normally pay by debit or credit card, this can be done by downloading the most recent statements online or requesting it be mailed to you. If you normally pay with cash, take a broad estimate by adding up the cash withdrawals made from your bank in the past 3-6 months. As a last resort, and with some patience, you can use an expense tracker to manually log every time to make a purchase throughout a 30-day period. Be sure to include such automatic payments as subscriptions, membership, utilities, rent/mortgage, insurance, car loans, internet, phone, and anything else that can easily fly under the radar.

Take the average of how much you spend in a month. Is your income meeting that average expense number? If not, by how much?

Maybe you find that you’re meeting your expenses, but have nothing extra for the holidays, vacation, or anything unexpected.

Again, let’s come back to that number: what is the amount that would make you comfortable in your present situation?

Next, take a look at the variability among the months. Although you have a monthly average calculated, do the months wildly differ from one to the next? This will be important to note so that you don’t mistake the magnitude of any surplus or deficit.

It can be very common to underestimate expenses. The reason for this is the nature of one-off expenses. It’s easy to say, “Once I pay for xyz, I won’t have to pay for it again.” But what is commonly forgotten is that there was a different event in the month prior, and yet another one in the earlier month before that. One thing you can always expect is that something unexpected will incur some kind of expense. You must build in a buffer as a “setback amount” that you don’t plan to spend but know that you eventually will. It may not occur every month, but eventually it will occur and cost (hopefully) somewhere within the amount that you’ve saved for that purpose.

Pay special attention to these ad hoc expenses and determine an average amount that you can aim to save every month for this purpose.

Walk the Baby Steps

Classify the actual expenses into two types: wants and needs. Both types of costs can be reduced, but you can go further with wants than you can with needs. Expenses under “wants” can be partially or fully eliminated or replaced, whereas expense “needs” can only be reduced through shopping around for a better deal. Wants should be your first focus.

• Your recurring coffee purchase
• Grabbing fast food for lunch in the middle of the workday
• Impulse buys when you go grocery shopping
• Subscriptions to various media outlets
• Memberships to gyms, pools, and other facilities

Now before you cut all the simple pleasures out of your life, think to yourself: are there small steps I can take so that I can still enjoy these things in smaller quantities or different ways? You don’t want to take such extreme measures that you lose the reward of your hard work, but you also want to be smart and economical with the capabilities that you do have. Like most things in life, “nothing in excess” is a wise axiom to live by.

• Credit cards: Pay off all credit card debt as fast as possible.
• Intentional shopping: Create a shopping list and stick to it to avoid impulse buys.
• Bulk purchases: Buy non-perishable foods and items in bulk to save money long-term.
• Coupons: Use coupons for items you truly need.
• Rewards programs: Join loyalty programs at frequently visited stores.
• Lunchbox: Prepare meals at home to save on eating out expenses.
• Subscriptions/memberships: Review and cancel unused subscriptions or memberships.
• Vehicles: Consider scaling down to one vehicle if practical.
• Modes of transportation: Use public transport, walking, or biking when possible.
• Share expenses: Share housing or utilities with a roommate or family member.

There is a myriad of ways to cut expenses, but these examples provide some starter ideas. Remember to reward yourself from time to time when you’re faithful to stick to your disciplined plan!

Conclusion

While cutting expenses may not be the most exciting goal on your list, it can yield results that send positive shockwaves for years into your future. Shifting momentum from the downward to the upward spiral not only is positive for the bank balance, but it reinforces within your mind a confidence that change is possible. Strengthening the conviction within yourself of the power to do and be more is a priceless asset in itself.

Success does not happen in a single day; it is the result of laying a foundation and building layer upon layer. From the foundation of a balanced budget, you can progress toward other goals which will exponentially improve your financial situation: saving, investing and growing in earning potential!