Modest budgets can be the result of intentional frugality or the result of lack of money and increasing debt. Either way, a modest budget can help to restore and maintain personal financial solvency by keeping costs lower than income. People who master the art of living on a modest budget avoid the stress of constantly dealing with creditors and a shortage of money.
Wants and Needs
Distinguishing between what you want and what you need is essential when living on a modest budget. Doing without food that you need to save money is counterproductive because it will compromise your health, lower your quality of life and probably cost you more in the long run. However, avoiding going out to expensive restaurants can save you a lot of money. It may deprive you of something you like, but will not deprive you of what you need as long as you're getting adequate nutrition by cooking at home, which is far less expensive than eating at a restaurant.
To maintain a modest budget, you need to be aware of where your money is going. Unless you have a prodigious memory, the best and easiest way to do this is to write down what you spend whenever you spend it. Carry a small notebook for this purpose. After a few months of doing this, you may be shocked to learn how much you have been unconsciously spending on magazines or cups of expensive coffee. Being aware of these expenses can help you regulate them more effectively and spend your money consciously and efficiently.
Minimizing Carrying Costs
Carrying costs that you pay every month can take a huge bite out of your budget. These include rent or mortgage, utilities, insurance, cable TV, credit card interest and club memberships. Review these types of costs periodically and proactively seek out ways to decrease them. For example, if you have car insurance and home insurance from two different companies, you can sometimes get a lower total rate by getting both policies from the same company. Credit card debts should ideally be paid off every month to avoid spending money on high-interest debts. Cable bills can be eliminated completely if you decide you don't watch cable frequently enough to justify the expense.
Planning ahead and avoiding impulse spending can help a modest budget go further. Buying food in bulk, buying clothing or household goods during sales and using coupons and special offers can all combine to save you a lot of money. You can also save by keeping a list of things you need that aren't too pressing, and watching for them at yard sales or thrift shops, where items are often available for a fraction of what you would pay new.