If you get to the end of the month and do not have enough money, you may be overspending. Instead of endlessly struggling to live paycheck-to-paycheck, learn why you are unable to stick to a monthly budget.
Here are five reasons why you may be overspending your budget and how to save more money.
1. Not Having a Strict Budget
The first reason you may struggle to save money is simply not having a budget. If you are not tracking your expenses, it is almost impossible to know how much money you are actually saving. While it might feel like you are doing well, hidden expenses can quickly add up and cut into your savings.
If you do not have a monthly budget, you need to start tracking your income and expenses. Start with a simple spreadsheet that tracks your net income for the month along with everything you spend money on. Set a savings goal and then stick to paying yourself first before you make any extra purchases.
2. Lifestyle Creep
Use your budget to make sure you do not fall victim to lifestyle creep. Lifestyle creep is when your discretionary spending goes up over time as your income also increases. This is a phenomenon that can occur as you get raises and start to earn more money since you have extra cash to spend.
However, just because you make more money, you should not look to spend it all. By keeping your expenses flat while you earn more, you will be able to save a higher percentage to help reach financial independence. Lifestyle creep can occur by buying higher-end clothes, eating out more, or signing up for more subscriptions.
Subscription service creep is a good example of how costs can increase over time without even noticing. You may sign up for trial accounts for Netflix, Hulu, Amazon Prime, or other streaming services. As the trials expire, you suddenly have an extra monthly expense that you may forget about. Over time, the companies may also charge more money without you realizing.
3. Spending Too Much on Housing
Housing is generally the largest expense that will make up your monthly budget. If you are spending too much on your housing, it has a large impact on your overall expenses and reduces the margin available for saving money.
While we all want to have a large house or apartment, it may not always make sense financially. Take a close look at your living situation to see if you should downsize to save money. Even a few hundred dollars per month difference can add up for your savings.
4. Not Having an Emergency Fund
An emergency fund is critical to not going over your budget with unexpected costs. By having some emergency savings, you will be able to cover medical bills, car repairs, and home repairs that pop up. Otherwise, those expenses would have to come from your monthly budget.
Start by building up an emergency fund of a few hundred dollars. Over time, try to save more to be able to cover three to six months of expenses. Even a small emergency fund can go a long way to maintaining your budget, no matter what happens.
Daniel Joseph is the founder of CoupleWealth.com, a blog focused on helping couples and young adults increase their financial stability. He and his wife paid off $88,000 in student loans, bought a house, and grew their net worth to over $500,000 by the time they were 32.