In this rough economy, most of us are looking for ways to tighten our belts. Budgeting is a smart thing to do, especially when funds are limited. Taking a $5,000 vacation when you are worried about your job and your mortgage? Not a good idea! However, in the quest to remain on top of one’s finances, it is possible to become too frugal, which can ultimately undermine budgeting efforts.
Let’s say that you are on a diet and decide to eat only the healthiest food. No chocolate. No pasta. No fast food. Ever. How likely is it that the diet will be successful? Not very. For most people, high-fat food tastes better, and if they try to stick to a diet of whole wheat and carrots, they will just wind up getting frustrated and quitting. Sticking to a diet is easier if you allow yourself to have a slice of chocolate cake once in a while.
It works the same way with budgeting. You want to pay all of your bills on time, save money, and avoid debt and tell yourself that you are only going to spend money on bare necessities. No dining out. No cable. No vacations. No movies. No books or magazines. No hobbies. This budget may be doable for a couple of months but probably not much longer.
Instead of cutting out pleasures completely, look for ways to do them for a reasonable price. Do you like eating out? Go to restaurants that cost $15 a meal instead of $50. Or if you really want to go to that $50 restaurant, eat out once a month instead of once a week. Like traveling? Take day trips near your home (you won’t have to worry about paying for airfare and a hotel) or forgo vacations for a few years so you can splurge on a two-week trip to Europe. Love reading books? Check out the used-book store. Or better yet, go to the library – they still exist!
Even if you are looking for ways to lower costs, you may not have enough money to buy or do everything you want. Forgoing some luxuries makes it easier to splurge in other areas. Think about what is most important to you and what doesn’t matter as much. If you love going to the opera, you don’t have to automatically give it up because you are on a budget. Free up cash by buying generic brands at the supermarket. Bring your lunch to work instead of eating out. Get your hair cut once every three months instead of once a month. On the other hand, if you’re a foodie, you may want to sacrifice going to the opera and other entertainment activities so that you can eat lunch out and get $15 cheese at the supermarket.
Being financially responsible does not mean that you have to live the life of a monk. It will be easier to control your spending and save if you leave some room in your budget for fun.