Save money without budgeting
Issue date: 10/8/10 Section: News
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Personal finance is just as much about psychology as it is numbers and information. It is important to remove the tedious acts that everyone despises like budgeting and cutting all your expenses. A system where you can consciously spend on the things you enjoy while cutting costs in other areas is much more sustainable than the painful process of monitoring every small expense.
Before you create and use your conscious spending plan, you need to understand the idea of frugality. Frugality is vastly different from being cheap. A cheap person will try to save money on everything, keep track of how much each of their friends owes them, and slowly go insane. A frugal person will understand that there are specific items they really enjoy and spend their money on those, while cutting their expenses on other things.
For example, if you have high standards of living and want a nice apartment, focus on spending your money on that want. If you love to travel, do it. If you really enjoy the Caramel Apple Spice that shows up in Starbucks this time of year, go crazy. However, you must simultaneously be frugal with regard to other expenses. Don't buy a new car right out of school if it is not absolutely necessary. Pack your lunches. Don't pay for a gym membership that you will only use twice a month.
Now that you understand the importance of a frugal mindset, let us dig in to how a conscious spending plan works. For the purposes of this plan, imagine you are working at your first job out of school and making $36,000 per year after taxes ($3000 per month). This plan involves four major areas where your money will go: