In this article we dive into how to reduce discretionary spending, the second hack of “Master the Top 5 Money Hacks and Save Big Money.” Discretionary spending, often referred to as “non-essential” spending, can be a silent budget killer. It’s those little, seemingly harmless expenses that add up and can derail your financial goals. I transitioned away from full-time employment in 2019, this emerged as one of the primary areas where my family successfully saved money. It becomes very important to evaluate your budget, reviewing each line item to distinguish those falling under the category of “non-essential” expenses.

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Understanding Discretionary Spending

Before we jump into the mission of trimming discretionary spending, let’s ensure we’re on the same page about what it entails. Discretionary spending covers all those expenses that aren’t vital for survival or maintaining a basic standard of living. These are the costs that add comfort, enjoyment, and convenience to your life. However, they often hold room for reduction without compromising your overall well-being and joy.

Examples of discretionary spending include:

1. Dining out: Those delicious restaurant meals and takeout orders.
2. Entertainment: Movie tickets, streaming subscriptions, concerts, and other forms of leisure.
3. Shopping: Impulse purchases, clothing, gadgets, and non-essential items.
4. Travel: Weekend getaways, vacations, and adventures.
5. Hobbies: Any leisure activities that require spending, such as sports, crafts, or collecting.

Now that we’re on the same page, let’s explore some top tips to help you rein in your discretionary spending without feeling like you’re missing out on life’s pleasures.

1. Set a Discretionary Spending Limit

One of the most effective ways to manage discretionary spending is to set a clear limit on how much you’re willing to allocate to it each month. This means deciding in advance how much of your income will be designated for non-essential expenses. However, once you reach your limit, it’s time to hold off on any further discretionary spending until the next month.

Creating a discretionary spending limit not only helps you keep your spending in check, but also encourages mindful decision-making. You’ll find yourself questioning whether that impromptu shopping spree or last-minute restaurant visit is worth it within the confines of your set limit.

2. Create a Discretionary Spending Category in Your Budget

To effectively track and control your discretionary spending, consider adding a dedicated category to your budget. This category should include all non-essential expenses, and you should allocate a specific amount to it each month. This method allows you to see at a glance how much you’ve spent and how much is left in your discretionary spending budget.

By bringing discretionary spending into your budget, you’re treating it as a planned expense. This can make it easier to curb impulsive spending. Read more about “How to Create a Budget that will Help you Save,” an article that focuses only on budgeting.

3. Embrace the 24-Hour Rule

Impulse buying is a significant contributor to discretionary spending. To combat this, implement the 24-hour rule. When you’re tempted to make an unplanned purchase, force yourself to wait 24 hours before going through with it. Definitely, this waiting period gives you time to consider whether the purchase is truly necessary and aligns with your financial goals.

More often than not, you’ll find that the initial desire to buy fades away after a day, saving you money and reducing discretionary spending.

4. Prioritize Experiences Over Things

In a world driven by consumerism, it’s easy to fall into the trap of buying more stuff. Studies consistently show that experiences tend to bring more lasting happiness than material possessions. When you shift your focus from buying things to creating memorable experiences, you can reduce discretionary spending while enhancing your overall well-being.

Instead of shopping for the latest gadgets, consider investing in experiences like travel, hobbies, or even learning a new skill. These experiences can provide long-lasting joy without cluttering your life with unnecessary possessions. Consider camping with your family, traveling to local destinations like waterfalls or public parks, or doing a free local event if you are looking to skip out on the expense of traveling.

5. Cook at Home

Dining out is a common discretionary expense, and it’s often a significant budget drain. While it’s nice to enjoy a restaurant meal occasionally, frequent dining out can put a strain on your finances.

To cut back on this expense, try cooking at home more often. Not only is it generally more affordable, but it also allows you to have control over the ingredients and portion sizes. Plus, cooking can be a fun and rewarding experience in itself. Imagine sushi night with your favorite beverage, special someone, and favorite music in the background. You have full control over your own experience! My husband and I loved this sushi kit for beginners and are mildly experts at this point! If you are not a cooking expert, it’s never too late to start. Here are a few cookbooks to browse for beginners.

Cookbooks Options by Culinary Category

1. Italian
2. French
3. Asian
4. Mediterranean
5. Mexican

6. Identify and Eliminate Subscriptions

Many of us have subscriptions that we no longer use or need. Take a close look at your monthly subscriptions, including streaming services, magazines, gym memberships, and more. If you find subscriptions that you rarely use, consider canceling them. Believe me, you’re investing in things you don’t use. We subscribed to a magazine for a year without receiving it, and the same happened with an unused Amazon Music subscription. Also, consider looking into bundling subscriptions to save. We were able to bundle some streaming services and even get one year free through our cell phone providers.

👉 Pro Tip: How much is your cable bill? Are you really watching all the different channels? Could streaming the service and cancelling the cable network be less expensive? Just a point that helped us save!

7. Practice the 30-Day Rule for Discretionary Spending

Similar to the 24-hour rule, the 30-day rule adds an extra layer of consideration for non-essential purchases. Consider this rule for costly, non-essential expenses. During this time, evaluate whether you still want or need the item after a month.

This rule not only reduces impulse purchases, but also gives you time to research and find better deals or alternatives.

8. Use Cash Envelopes

Cash envelopes are an effective way to control discretionary spending. Allocate a set amount of cash to specific spending categories, like dining out or entertainment, and keep that cash in separate envelopes. Once the cash in an envelope is gone for the month, you can’t spend any more in that category until the next month.

Using cash envelopes forces you to stay within your budgeted amounts and makes it visually clear how much you have left for each category. You can go old fashion with a standard envelope or consider this budget binder with 8 pcs zipper envelopes and labels. Either way, it is a very helpful way to keep you from overspending.

9. Comparison Shop and Look for Deals

Before making any purchase, especially larger ones, take the time to shop around and compare prices. Use websites and apps to find the best deals, and consider waiting for sales or discounts. Many retailers offer special promotions throughout the year, especially around the holidays, so patience can pay off.

Additionally, explore the world of cashback and rewards programs, which can provide significant savings over time.

Learn more about the best methods to comparison shop in my article “Comparison Shopping: Learn How to Shop Wisely.“

👉 Pro Tip for Comparison Shopping: Google image search your items. I saved a significant amount of money furniture shopping this way.

10. Build a Support System

If you’re serious about reducing discretionary spending, it can help to have an accountability partner. Share your financial goals and budgeting strategies with a friend, family member, or your partner who can provide encouragement and help you stay on track. Discussing your financial plans with someone you trust can make the journey to thriftier spending more enjoyable and achievable.

11. Track Your Progress and Reward Yourself

Finally, don’t forget to celebrate your successes along the way. Consider setting aside a portion of your budget as fun money. This can be an amount you are comfortable with spending on anything you would like for the month. Periodically review your discretionary spending and assess how well you’re sticking to your budget. When you hit milestones or accomplish your goals, treat yourself to a small, budget-friendly reward. Recognizing your achievements can motivate you to stay committed to your financial objectives.

Directions for Use:

In conclusion, reducing discretionary spending is a powerful way to take control of your finances and work towards your financial goals. By setting clear limits, tracking spending, and making mindful choices, you can enjoy a more thrifty lifestyle without sacrificing the things that truly matter to you. It’s time to take charge of your discretionary spending and pave the way to a more secure and prosperous financial future.

Ready To Start Your Journey To Financial Wellness?

Navigate the complexities of personal finance with clarity and confidence. Whether you’re starting your financial journey or seeking to enhance your existing strategies, my eBook “A Guide to Financial Wellness” provides actionable insights, real-world advice, and a roadmap to financial well-being.

Are you mastering discretionary spending? Comment below!

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