You already know the traditional answer: Keep track of what you’re spending each month and scrub non-essentials, line by line. But there’s a better, more holistic way. I call it “The Big Bang” – the all-time winner for getting your spending and saving on track.
Big Bang believers look at budgeting last. First, you think “how much more money am I going to save?” If you’re in a 401(k), jump your savings from a low percentage of every paycheck to a high one – say, to 15 percent. Or have your bank take 15 percent out of every paycheck and transfer it, automatically, into savings or an Individual Retirement Account.
“Wait a minute,” you’ll say, “if I do that, I won’t have enough money left to pay my bills.” But you will! That’s the beauty of the Big Bang. We tend to spend whatever we see in our checking accounts. If there’s less money in your account each month, you’ll figure out how to spend less – automatically.
That’s when the scrubbing comes in. You’ll start looking at each bill, to see how you can bring your spending into line with what’s in your checking account. That’s what you’d have to do if your pay was cut by 10 percent, so why not “cut” your pay yourself by putting more into savings and spending less?