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If your bank account looks a little empty lately, it may not be your budget, but your spending. Here's how to get back on track.
Unless you’re a Powerball winner or one of “Daddy” Warbucks’ lucky heirs, chances are you would like to have more money in your bank account. No matter how much you’d like to change your financial situation, getting there often takes work.

Many people think there isn’t enough wiggle room in their budget to allow for more savings. How can they grow their bank accounts and investment portfolios if the line between monthly income and spending is so thin?

While I could sit here and talk all day about the importance of a solid financial plan, the power of compound interest, and the best ways to get a better-paying job, there might actually be an easier way to get richer. And it lies in the difference between making spending cuts vs. budget cuts.

The Difference Between Spending Cuts vs. Budget Cuts

At first glance, spending cuts and budget cuts might seem almost identical. But if you break it down, you’ll see the difference between the two comes down to purpose.

Your budget is intended to manage your necessary spending. This includes things like your mortgage or rent payment, utilities, taxes, transportation costs, groceries, and healthcare spending. While you can adjust many of these expense categories, doing so often requires serious lifestyle shifts.

For example, if you need to cut your housing costs, you’ll find that it isn’t a simple process. In most cases, you would need to either downsize and move into a new home, or refinance your mortgage.

Related: How to Pay Your 30-Year Mortgage in 10 Years

The same applies to cutting monthly vehicle costs. You can’t change your car payment without trading in your vehicle or refinancing your existing loan. Changing your transportation budget would require significant effort.

Spending cuts, on the other hand, are more about the things that we choose to spend money on each month. These include luxuries such as dining out, entertainment, shopping trips and even home and personal services.

What About Making More?

For many of us, the thought of getting richer usually involves some big influx of cash. This might mean winning the jackpot or snagging a new high-paying job, boosting our income.

While this is certainly another way of increasing savings–and getting richer–it’s not necessarily the easiest path. If you’re unable to switch jobs, successfully negotiate a pay raise, or even take on a side hustle, you might not be able to make more money.

However, by keeping more of the money that you are already making, you reduce the effort involved. There’s no need to switch up your career or take on more work… you just need to keep more of your money in your own pocket.

Use Spending Cuts to Get Richer

The money you are already making has the potential to make you richer if you put it to work. There are a few ways you can approach this process. Once you determine which method works best, you can double down by implementing even more strategies.

Evaluate Your Current Spending

The first step in establishing spending cuts is to understand how you’re actually spending your money. While you may think you know the answer, sitting down and crunching the numbers may surprise you.

For instance, a couple of years back, my husband and I wanted to trim our monthly spending and begin saving for a new car. We brainstormed places where we could cut back and really struggled to identify anything beyond cutting the cord and refinancing my student loans.

Neither of us really spent a lot of money. We didn’t eat fancy dinners, I wasn’t out buying pricey shoes and clothes, and neither of us blew money on electronics or anything big. When we dove deeper, though, we could identify hundreds of dollars in unnecessary spending.

That $5 breakfast sandwich I grabbed after dropping my kids off at school didn’t seem important. Neither did the latte and pastry I often bought while writing at the coffee shop.

That is, of course, until I realized I was spending upwards of $175 each month between the two. Add a meal on-the-go (or two) each week, my husband’s occasional Subway lunches, and my penchant for Red Bull, and we were spending more than $300 right there.

I didn’t think these $3-$5 expenses made a big difference. However, even small purchases can add up quickly when repeated frequently. Make sure to analyze your spending in depth and you might find hundreds in hidden spending.

Establish Clear Goals

Cutting spending and saving more sound great in theory. Unfortunately, though, these goals often fall by the wayside because they are too broad.

Instead, try establishing clear, defined spending cut goals for yourself and your family. For example:

  • Don’t say things like, “We need to spend less on groceries (or entertainment, eating out, clothes, etc.) this month.”
  • Do make statements such as, “We spent $315 at restaurants last month; let’s trim that to $200 this month and down to $150 next month.”

By setting measurable targets, you make it easier to not only work toward your goals but also know when you’ve hit the mark.

Find a System That Helps You Visualize Your Budget

You don’t have to cut out things you enjoy completely to meet your goals. You just need to understand that every budget has limits, and the money for all spending has to be accounted for somewhere in the budget.

Therefore, it’s important to divvy up your funds each month in a way that allows for your savings goals, household expenses and even “fun money.” When that money is gone, it’s gone until next month unless you want to sacrifice another goal instead.

The best way to visualize this is by using a system like the envelope method, which forces you to acknowledge that every dollar has to come from somewhere. This can be done either with cash in envelopes or by using an app like Mvelopes.

Every month, you’ll allocate funds for each spending category. For example: $750 for groceries, $100 into vacation savings, $50 for fast food and coffee, $75 for clothes, etc. Whatever works for you. Then, when that money is spent, it’s spent.

If you overspend on a new pair of jeans, you must pull that cash from somewhere else. That might mean spending less on groceries this month or accepting that your purchase cut into your vacation fund. But either way, you’re forced to recognize the impact of your overspending on your overall financial picture.

Track Your Progress

It’s hard to stay motivated with a goal as uncomfortable as cutting spending, unless you’re able to track your progress along the way. Be sure you find a method for not only seeing how far you’ve come but also encouraging you along the way.

For some, this might mean transferring that reduced spending into a special savings account to watch it grow. You may choose to have a physical chart or write the total amount saved on a dry erase board in the kitchen.

You can choose to have an accountability partner. This could be your spouse, a friend, a parent, or even a co-worker with whom you check in regularly. Being forced to both track and account for your progress (or missteps) can be very motivating when you’re tempted to overspend.

Related: 4 Budget Types and the Best Tools for Each One

Reward Yourself

Few of us are able to stay the path when it comes to reducing spending, without a little reward or two along the way. Find a way to encourage yourself!

This could mean dinner out with your spouse when you hit a big milestone, or some small treat when you meet your monthly goals. Don’t make your reward so big that it derails your progress. It should be just enough that you look forward to it and feel motivated afterward.

Bottom Line: Anyone Can Get Richer

Odds are, we all define “rich” differently. That might mean a yacht off the Italian coast for some, or simply achieving financial independence for others.

Regardless of what being rich means to you, everyone reading this is capable of getting richer. You simply need to find ways to cut spending and save more of what you already make. Over time, your savings will grow. You will develop even more money-saving strategies and your income may even increase, further compounding your efforts.

But today, right now, every one of us is capable of cutting spending and winding up richer at the end of the year. So, how will you get richer this month?

Article comments

1 comment
Steveark says:

That is a beautifully done piece of writing. I’d normally just comment on content but sometimes when the presentation is so artfully done I can’t help mentioning it. And the advice is dead on as well!