How To Incrementally Optimize Your Finances

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“Budgets are too restrictive”

“I don’t want to live like a hermit”

“Budgets are not fun at all”

“There’s got to be a better way to save money”

I get pretty fired up when talking about budgets. I mean, you can ask anyone who’s ever asked me any financial question, I can go on and on and on and on and on about what an amazing tool budgets are for kicking financial booty! In fact, I inevitably point people to my budgeting basics series in almost every conversation and blog post (see, I did it again) because it is so foundational to how people should manage their money. I have also heard almost every excuse in the book on why budgets people can “never seem to get ahead” or hit any financial goals.

And you know what, I completely understand.

I used to have a hard time grasping how I could make so little money and do anything meaningful financially. I also fell into the trap of thinking about budgets and saving as “lame”, and for suckers who didn’t want to live in the moment.

And I was wrong.

Step by Step Guide Optimize

The First Step Is Taking The First Step

I’ve mentioned it before, but my financial catalyst was getting engaged to my beautiful bride. I was suddenly a few months away from getting married and had NO IDEA what to do. I wanted to save money and stop wasting it all on mall food, but didn’t really know what to do. I had been given a Dave Ramsey audio book, but didn’t care to listen, and even though I had started tracking my spending, I had not taken ANY steps toward changing where my money went.

All excuses for not getting your finances in order are built on a foundation of inaction.

The first step to financial optimization is taking the first step.

Pick A Few Target Areas To Cut

When you finally get moving on your budget, you’ll have a good idea of where your money is going. Most likely there are a few categories that are out of whack, and I recommend getting laser-focused on those. Start but cutting back to where you feel comfortable in those places and get used to the new budget for a few months. It usually takes about 3 months to fully adjust to your new spending level, so just focus on sticking to your budget.

Learn To Love The New Normal

When you have to cut some spending out of your life, it usually feels like deprivation. But as you adjust to your new normal, you’ll realize that you aren’t actually missing out. You get more creative with the money you DO have to spend, you enjoy more things that DON’T cost money.

For example, we used to eat out a LOT after work. Michelle worked in the fancy part of town that had great happy hours and a TON of really good restaurants. When she got pregnant, we decided to cut down the date night and restaurants budget by quite a bit. We were pretty bummed, but soon found that there were much more inexpensive ways to have a fun date night and unwind after work. There was $5 wine tasting at a great place on the way home, and we would grill up something delicious or pick up something To-Go to enjoy at home. After a month or so, we didn’t miss the happy hours and were saving over $100 a month!

You will love your new normal.

I believe cutting expenses and saving money wakes up your creative side and forces your brain to do some work. Giving yourself some guidelines to work within still leaves the opportunity to have some fun, and save a ton of money at the same time.

Ratchet Down Your Budget Again

Now that you’ve cut a few budgeting weeds down to size and are enjoying your new normal, it’s time to challenge yourself again. You cut down your monthly food budget from $800 to $700? Let’s shoot for $650 next month. Cut those daily lattes down to twice a week? Let’s shoot for only two a month and keep having that tasty homemade coffee instead. And then find something else in your budget you didn’t think you could cut down, and find a way to save money on it. Maybe it’s as simple as catching some billing mistakes, or maybe you don’t actually need that ridiculous car payment.

Here’s the deal; once you starting saving money in one area, you start seeing all the other places that money is leaking out of your budget. You can incrementally ratchet those areas down until you’re saving hundreds per month, enjoying life and being a frugally creative superstar.

Save Until It Hurts

Once you’ve gotten into the habit of cranking down the ratchet on your budget, put that savings to work! Each round of budget hacking should turn into more money toward your goals. As my friend Sam would say, SAVE UNTIL IT HURTS! As you walk through this process, at some point in each category, you’ll hit the point of maximum savings and level off the budget. You’ll find that if you cut anymore you can’t actually stick to the budget, so just stop and plant your flag in the ground. You’ve made it!

This process is easy, and it works.

It’s helps build steps into the process of lowering your expenses without it feeling like you just stepped off a cliff. You can incrementally optimize your finances to increase your savings, lower your waste and simplify your financial life. Give it a shot, start this month and enjoy 🙂

photo credit: Day 305: Rent via photopin (license)

Jacob Wade

Jacob Wade

Jacob Wade has been a nationally-recognized personal finance expert for the past decade. He has written professionally for The Balance, The Spruce, LendingTree, Investing Answers, and other widely-followed sites. 
He’s also been a featured expert on CBS News, MSN Money, Forbes, Nasdaq, Yahoo! Finance, Go Banking Rates, and AOL Finance.

In 2018, Jacob quit his job and his family decided to sell everything (including their home) to take off on an adventure. They traveled the country in an RV for nearly 3 years, visiting over 38 states, 20+ national parks and eventually settling in the sunshine state!

8 thoughts on “How To Incrementally Optimize Your Finances”

  1. I look at a budget in a positive way, not in a negative way. Most times, you hear people talk about how a budget restricts their spending. I look at a budget as a tool to get me to where I want to be one day. Instead of focusing on not buying a new pair of jeans, I focus instead on how the budget will allow me to quit working at 50 and live an amazing life.

  2. Whoo hoo! Save until it hurts is right! Or else you’re not saving enough.

    Are we really going all the way out to Charlotte this year? What happened to Fincon being in the MIDDLE of the country for all to access?

    If we do San Diego or Honolulu next, we good!

    • Saving until you’re uncomfortable won’t do. You need it to BURN BABY BURN!

      And yeah, I thought they were going to stay away from Coastal towns to be fair. Guess it HAS to be West Coast next year!

  3. Fantastic guide and it’s very reliable sources article. Budgeting is really important when it comes on How to Incrementally Optimize Your Finances. Glad to read this. Thanks for sharing this article. Great post!

  4. I don’t hate budgets. From my point of view budgets are the pillars of every new building. Strong pillars guarantee resistance to stress and problems. Cutting some parts of the budget is like adjusting the building, nothing more.

  5. I really love “Learn To Love The New Normal”. That is so important when making changes. It takes a while and we have to be realistic. Once set in, we get used to it and find we CAN love the new normal.
    I am reminded of excellent advice on http://www.sparkpeople.com, a free database for tracking food and fitness for weight loss goals. A some point the comment was made that losing weight requires the effort of taking on a part time job. When looked at like that, it enables the person to plan accordingly.
    When we start cleaning our own houses, cooking our own meals, maybe working a few more hours and most importantly TRACKING our spending, it IS more time and effort. But so worth it. Putting the mindset that this effort will result in GREAT things helps.
    We can all do this. Thanks for your excellent post and reminders.


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