You may not be able to stop spending money completely. But, you can create a manageable budget and learn to stretch that budget as far as it will go. This piece will show you how to accomplish both goals.
Written by Natasha Wiebusch, J.D..
Updated December 2, 2021
Millions of working Americans—even those making well above the average salary—struggle to save money. Market Watch reports that Americans had an average pre-tax income of $78,635 in 2018 and spent about 80% of it. Once taxes have been factored in, the average American is hardly able to save anything at all.
It’s not easy to determine how to stop spending money. Or, at least, how to spend less money. Really, the best solution is to budget. Smart budgeting can lower costs, eliminate unnecessary expenses, and help with debt management. If you want to save money and stretch your income, keep reading. In this piece, we provide 50 tips on how to spend less money.
Are You Overspending?
If you’re not sure whether you’re overspending, you’re not alone. According to a recent survey, 65% of Americans don’t know how much they spent the previous month. In 2019, CNBC reported that on average, consumers overspend by over $7,000 a year.
Overspending habits lead to added debt and other serious negative financial consequences. What starts as credit card debt can lead to collection actions like garnishing your bank accounts, liens, and even foreclosure.
The first step in halting overspending is to create a budget that works for you. A budget will show how much you’re spending and whether you’re spending more than you’re making. Creating a budget will also help you understand where your money is going, which will make it easier to strategically lower your expenditures.
7 Tips if You Don’t Yet Have a Budget
Below are seven tips to help you get organized and ready to start a budget.
Before creating your budget, consider what your immediate and overall financial goals are. Goals may include increasing your savings account balance, creating an emergency fund, reducing debt, or contributing funds to a particular purpose. Having goals in mind will help to ensure that your budget reflects your values.
Long-term life and financial goals can help you stay motivated, but it’s sometimes hard to imagine how smaller spending decisions can impact distant goals. A plan can help you change spending habits and stay motivated. Planning involves creating your budget, scheduling expenses ahead of time, and considering activities, like self-care, date nights, and other special occasions.
Budgets should be created based on actual pay. Actual pay, sometimes called net pay, is what you take home after all deductions have been made to your gross pay. If you earn tips, use your weekly average.
Expenses can be categorized in many ways. The most common necessary expenses include food, housing, transportation, healthcare, insurance, and retirement. Other expenses may include phone plans, credit card payments, or loan payments.
6 Tips if Your Income Is Too Low To Afford Your Basic Expenses
Everyone has basic expenses that can’t be eliminated. In some cases, these expenses alone can exceed your current income. Below are six tips to help you lower these basic expenses.
The key to successful budgeting is understanding where your money is going. This includes understanding how much you spend on groceries, clothes, school supplies, and gas. Once you know how much you spend in every category, it will be easier to find and take advantage of bargains.
Write down everything you spend for a month. This includes everything from housing to chewing gum. If you do this, you might be surprised about where your money is going.
Not all expenses can be lowered, but some can. One way to lower expenses is by comparing options. You can compare grocery stores, brands of common household items, and services like childcare. Aside from comparing options, you can also use coupons, buy generic brands only, and if possible, shop in bulk. Lowering these basic expenses can create helpful savings.
Depending on your income and your family size, you may be entitled to financial assistance from the government. This includes assistance with food expenses, eligibility for affordable housing, healthcare assistance, charity care, and others.
Working from home reduces costs in many ways. You’ll pay less for gas, it will be easier to make affordable lunch plans, and you may be able to coordinate more flexible dependent care or childcare plans.
The cost of living in cities like San Francisco and New York has increased significantly in recent years, driving many to move elsewhere.
Take, for example, the difference in cost of living for Poughkeepsie, NY, and New York City:
The overall cost of living is 43.5% less in Poughkeepsie than in NYC and the housing costs are 66.3% less. Poughkeepsie is on the Metro-North commuter rail line. But, since it's about two hours each way into the City, it's probably not the best idea to commute.
Commuting has its own built-in expenses. This Poughkeepsie and New York City comparison is just one example of nearby cities with comparable quality of life with vastly different costs of living.
4 Tips if You’re Spending Too Much
You may be spending too much beyond your basic expenses. There are steps you can take to pull back on non-essentials without sacrificing your essentials.
A common temptation is to spend future income—money you know is coming but it’s not in your account yet. This approach can be tempting because you know that the money is coming your way… eventually. This often happens with bonuses, expected tax returns, and future sales. Unfortunately, spending future money usually causes damage to financial health because even though money spent can be recuperated in the future, bills and expenses will continue at the same rate. Wait until money is in your account to spend it.
There may be something you’d like to buy, but it’s not budgeted for. If you ultimately decide to purchase it, take action to maintain your budget even with the purchase. This may involve selling something you own, finding a side hustle, or taking a weekend job to make up the difference.
Some say that comparison is the enemy of happiness. Yet, everyone does it. Unfortunately, sometimes comparisons or peer pressure lead to either spending more than originally planned or purchases of unnecessary things. Others may feel compelled to spend money but that doesn’t mean you have to do so as well. Sticking to your budget is nothing to be ashamed of. It is a sign of self-respect and self-care.
Shopping and other addictions are very common contributors to financial stress. Although shopping addiction is discussed less frequently than substance addiction, it’s common. And like other addictions, shopping addiction is a health issue that can be treated. If you think you might have an addiction, it’s important to reach out for help.
3 Tips for Dealing with Credit Cards
Credit cards can help families purchase necessary items, and gain benefits like cash back and improved credit. Although credit cards have benefits, they also have high interest rates and associated fees that can easily increase your debt.
Below are three tips to help you keep your credit card use in check:
The fewer credit card payments to keep track of, the easier it is to stay on budget.
If you already have other cards and they don't charge a fee, you may want to keep them open, but not use them. When you don’t use your credit cards but keep them open, credit bureaus will consider them when calculating your credit utilization ratio. A credit utilization ratio reflects how much of your available credit you’re using at any given time. Having credit cards with zero balances will improve your credit utilization ratio which will raise your credit score.
You may want to use a credit card for certain expenses, but not others. One way to help you keep your credit card expenses separate is to leave your credit card at home when you go shopping for items that are not specifically budgeted to be purchased on your cards. Doing this will also help you keep your balances low so that you can pay them off every pay period.
3 Tips for Dealing with Debit Cards
Unlike credit cards, debit cards are connected directly to your checking accounts. Unless you’re budgeting using a cash system, it’s helpful to have some strategies in place to guard against spending too much of your income.
Ask your bank to either decline your card when there aren't enough funds to cover a purchase, or only pay up to a zero balance. If your bank offers overdraft protection as an alternative, decline this option. Overdraft protection guarantees that any transaction or check will clear when your checking account falls below zero. Overdraft protection usually involves fees, and it can cause overspending
Phone apps are a great way to stay updated on your balance in real-time. You can use your phone app to track and transfer money to those with whom you share expenses.
It’s easy to forget where you’re at with spending for the month. Freezing your card can help by preventing any new transactions from being approved. You can freeze any credit card or debit card at any time. Nowadays, most banks allow customers to do this from the bank’s phone app.
Live Community Q&A794 Members Online · 4,753+ Posts
Professional Q&As for "50 Tips To Stretch Your Budget and Spend Less Money"
Upsolve Community Member
I'm really starting small. I need money for Christmas. What can I do. I'm not filing bankruptcy......see more
Upsolve Community Member
breather, you might want to do a quick read of Upsolve's tips in the article I got my Chapter 7 discharge!...see more
Upsolve Community Member
Because it's a moment in time and while it feels like a huge failure......see more
3 Tips for Handling Cash
If you prefer to use cash, consider the following tips to help you budget and save.
The envelope method is a budgeting method wherein envelopes are used to divide up your income by expense type. For this approach, create an envelope for each type of expense, including a savings envelope and an envelope for extra money, and add the allotted money to each envelope. Once the cash is spent, you’ll know that you can’t spend any more on a particular expense for the month.
Avoid ATMs with fees whenever possible. Your own bank’s ATMs typically will not charge you a fee. Systems like Allpoint and Moneypass won’t charge fees either. You can usually use your bank’s phone app to find a no-fee ATM.
When you take out money, ask for your account balance. Seeing your balance in real-time can help you stay on budget.
4 Tips for Online Shopping
Learn as much as you can about the item you’d like to purchase. Online, you can find prices, reviews, and product information to help you decide not only whether you want the product, but also whether it fits your budget.
It's easier to compare prices between stores with online shopping. When comparing pricing, remember that some companies will charge separately for shipping.
You may be able to find high-value items at affordable prices at thrift stores and on community pages, like Facebook Marketplace. Local groups may also post used items on their own social media pages. If you can’t find what you’re looking for, you can post an “In-Search-Of” (ISO) announcement.
Many services will allow you to save your credit card on file. But sometimes, these services will continue to charge you even when you’re no longer using them. To avoid an accidental charge, opt out of saving card information online.
Of course, this isn’t a hard-line rule. If a given credit card awards significant savings for a specific purchase, you may want to save the card since you’ll always use the same one anyways. Additionally, autopay options can help to ensure that you don’t incur late fees on purchases that you make regularly with the same card. Just make sure to pay off your credit card balance within a month.
3 Tips for Restaurants and Restaurant Delivery
Restaurants are a common expense for some families. Cooking at home is generally more affordable than restaurants. If you decide to go out or order in, below are three tips to help you save money.
You may have heard about “Taco Tuesdays,” “$5 Burger Night” or other targeted promotions. Restaurants hold specials like these on days that they usually wouldn’t get much business, and they’re often good deals. Some establishments also issue coupons every so often which you might find in your mail or on their websites.
Scheduling date night or family night can help you keep track of costs and stay on budget because it will keep you from going out/ordering in more often than what is affordable. And, you’ll be able to make traditions with your family, even if it’s just once a month or once a year.
Restaurant delivery apps are very convenient, but they often charge additional fees. These fees are separate from the driver’s tip. If you can’t leave your home and delivery is necessary, consider grocery delivery meals. Grocery delivery meals are generally more affordable than restaurant delivery. They often require you to either heat the meal or cook certain components.
4 Tips for Groceries
Shopping for groceries is generally the most affordable way to buy food. But not all grocery retailers are equal. Below are four tips to help you get the most out of your grocery shopping.
Different grocery stores often have different prices on things like milk, rice, vegetables, and the like. Generally, Aldi has the best grocery prices in most parts of the country.
The pandemic inadvertently has helped to streamline online grocery shopping. Online grocery shopping has many advantages. First, online grocery shopping lets you see the total price of your purchase before you have to check out. It’s also easier to resist impulse buys and stick to the shopping list when you’re in the comfort of your own home.
Shopping for seasonal foods saves money and improves overall health. Healthy eating also lowers healthcare costs. At $10,000 per year, healthcare costs make up one of the largest annual expenses for the average American
Cooking appliances like Instant Pots or slow cookers are great for cooking large amounts of food. They can help you with meal prep and they save time. Instant pots cost about $80 while slow cookers can cost as low as $20.
A Tip To Save on Fitness
Gym membership prices range depending on where you live. Some gym memberships cost hundreds each month. Nowadays, apps, social media, streaming services like Youtube, and sites like Blogilates have excellent workout resources available for free. You can find exercises that require no equipment or just free weights.
2 Tips To Save on Internet and Cellular
You may have seen ads for Mint Mobile or Tello. These phone companies offer more affordable phone plans at lower prices than the better-known companies. Some offer plans as low as $15 per month per line. Shop around for a plan that works for you. When you find a provider you like, ask for any deals offered to new customers. They may not mention it upfront.
In most cities, you’ll have a choice of a few different kinds of Internet service. This might include cable, DSL, satellite, and 4G internet. Some parts of the country have 5G. Different kinds of Internet access have their pros and cons depending on what you need to use the Internet for.
Regardless of your choice, check to see if there are companies that offer the same service. You may be able to get a good deal for leaving a competing provider. You can also tell your provider you want to leave to see if they can give you a better rate. Before signing, make sure the lower fee isn’t temporary.
A Tip to Save on Cable TV
Streaming services like Sling or Hulu + Live can replace your regular cable for much cheaper. If you’re paying for too many streaming services, consider unsubscribing or finding services that have free streaming options. Services like Netflix also have lower-cost subscription options.
4 Tips for Car Buyers
The car shortage caused by the pandemic has pushed car values to an extreme high. Although it’s a good time to sell your car, it’s not a great time to be shopping for one. The following tips can help you get the best deal possible in a difficult market.
Financial gurus generally advise against buying a new car because of how quickly they depreciate in value. In the first year alone, new cars drop in value by about 30%.
Don’t forget to factor in costs like gas, insurance, repairs, and maintenance when crafting your budget. Much of this information can be found on Kelly Blue Book and Consumer Reports. If you’re not sure how much insurance will cost, request a free quote from your current insurer.
Unfortunately, not all lenders are ethical. If you aren't familiar with a lender or you're engaging with a dealership that offers their own financing, research them before signing anything. You can check with the Better Business Bureau, browse online reviews, or consult friends for insight as well.
2 Tips for Car Owners
Car ownership comes with its own costs, some of which can’t be eliminated. But, there are strategies to help you lower your costs long term:
Keeping up with maintenance means making sure to get your oil changed when recommended, schedule check-ups periodically with a trusted mechanic, and rotate your tires when necessary. Good maintenance will lower your overall maintenance costs by preventing big-ticket problems. Not sure what maintenance is necessary? Check out Bridgestone’s ultimate car maintenance checklist.
Download a phone app to help you find the best gas prices. One of these is the Gasbuddy app.
3 Tips for Health Insurance
Health insurance is hard to navigate. And if it wasn’t already confusing, it’s gone through huge changes since 2010. Here are some tips to help you get health insurance on a budget.
Healthcare is one of the largest yearly expenses for the average American. The Center for Disease Control (CDC) reports that Americans spend on average about $11,172 a year. Staying insured will lower your risk of experiencing financial hardship caused by illness or injury.
Before choosing a health insurer and policy, learn all you can about the policy’s key terms. Also consider the costs of co-pays, out-of-pocket expenses, deductibles, coinsurance, network options etc.
Medicaid, Children's Health Insurance Program (CHIP), and Obamacare (a.k.a. ACA Benefits) are government-funded health insurance programs. The best way to get started on applying for Obamacare is by visiting Healthcare.gov.To apply for Medicaid or CHIP, contact your state’s department of health and human services.
For many, saving money is a tall order. Smart budgeting can help. Through a budget, you can save money, reduce stress, and improve your personal finances. Although all budgeting involves keeping track of and limiting your expenses, no budget plan is the same. If you want to spend less, create a budget that works for you, and keep these other helpful tips in mind.