With any goal, whether short, long, intermediate, or ongoing, you need a plan.
It’s one thing to resolve to save for that swanky Bora Bora vacation, obliterate student loan debt, or put 20% down on your first home. It’s another to take the steps necessary to reach your fiscal goals.
Creating a budget is one of the crucial steps. Without a spending plan, I wouldn’t have been able to pay off $25K of debt in one year.
Sadly, like the former, less financially prudent version of myself, many people shy away from documenting planned income and expenses.
When people hear the word budget, they immediately think of intense deprivation. What can I say? Without a bottomless well of cash, you’re gonna have to sacrifice. The question is, “How much?”
For years, I’ve pushed the idea that we should take action. I don’t care how small the action, take it. So what if you lack the desire, willpower, or wherewithal to sink your all into a mission? The late tennis great, Arthur Ashe, neatly packaged this concept in a few short sentences:
Start where you are. Use what you have. Do what you can.
I may have found the cure to your budget-o-phobia. It’s called the step-down principle
Here’s how it works. Imagine a staircase with five steps on it. On the top step is the most expensive method of buying a product. At the bottom, you have the cheapest option.
Going from a set of salon perfect acrylic fingernails to chipped and brittle talons overnight may prove too traumatic for you. Fortunately, countless choices lie between acting like a self-indulgent (wo)manchild and behaving like a scrooge.
After jotting down your estimated monthly expenses, study each line item. Brainstorm ways you can trim an expense category without axing it altogether.
Come with me on a fantastical shopping trip whereby I undergo the painful process of finding a pair of jeans that fit my abnormally long legs. Using the step-down principle, let’s come up with a few ideas:
Step 1 – Shell out top dollar for a new arrival at the Guess store
Step 2 – Settle for last season’s jeans at the Guess outlet
Step 3 – Scour the clearance rack at Macy’s (department store) for a pair of denim pants
Step 4 – Thumb through a hoard of irregular jeans at TJ Maxx (discount store)
Step 5 – Wrestle with competing bargain hunters at the Salvation Army (thrift store) on 25% Off Wednesdays
Now, let’s look at how you can apply the step-down principle to an entire expense category.
Housing: Buy a single-family house, rent an apartment by yourself, live with roommates, move-in with parents
Food: Full service restaurant, fast casual, fast food, frozen meals, homemade
Transportation: Lease a luxury car, own a modest, used vehicle, carpool, rely on public transit, bike/walk
Education: For-profit university, non-profit private university, public university, community college/trade school, library
Travel: Two-week international vacation, one-week domestic vacation, weekend getaway, daycation, staycation
To some people, it’s blasphemous to suggest replacing organic cuisine with highly processed, frozen fake food. But here’s the beauty of the step-down principle, you decide which step to settle on. As long as you’re willing to downgrade your lifestyle, you’ll free up cash that you can throw at other goals.
Bottom line, you don’t need to adopt 18th century living standards to save money.