How To Stop Wasting Money on This Necessary Budget Item, According to Ramit Sethi
Written by
Jordan Rosenfeld
Edited by
Molly Sullivan
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In today’s economy, where even basic necessities are more expensive than in recent years, it’s easy for people to unknowingly overspend on essential budget categories, hindering their ability to achieve financial freedom.
Ramit Sethi, financial expert, self-made millionaire and author of “Money for Couples” and “I Will Teach You to Be Rich,” emphasizes that there’s one item in particular that people are really wasting money on: food, although more specifically dining out (or ordering in).
Even worse, people often don’t talk to each other about their expenditures. He told MSNBC recently, “In millions of homes around the world, we’re having the same fights about money. One partner feels anxious, the other buries their head in the sand to avoid talking about it. One agonizes over the budget, the other spends on whatever they want.”
Here’s how to get this budget item under control.
You Need To Eat, but …
Food is undeniably an essential in everyone’s budget — you have to eat to survive. But many people are going about it the wrong way, according to Sethi — overspending on dining out rather than purposefully meal planning or bulk shopping for food to make at home.
Sethi suggested that 90% of people he talks to could free up a significant amount of money just by redirecting their dining out and ordering in to other categories in their budgets.
He said this is partly because “food is emotional” — meaning that often people purchase food away from home for reasons ranging from convenience to reward for something difficult. Plus, it’s a way to be social.
Parents may also send money to teenage children via digital payment apps when it’s easier not to cook for them or if they’re out with friends.
How To Stop It
The first step is vigilance — start tracking your spending, be that through a budgeting app or by checking your bank app daily. Mindless spending is likely to lead to more of the same.
Communicate
For couples or anyone sharing finances, he urged transparency so that you’re talking about expenditures and each of you knows what the other is spending money on, at least approximately. Don’t spend in secret and then end up fighting about it later — that adds emotional conflict on top of spending woes.
Next, it’s worth applying another of Sethi’s principles, which he calls conscious spending.
Understanding Conscious Spending
Conscious spending involves making deliberate choices about where your money goes, ensuring that your expenditures reflect your priorities and values.
Instead of adhering to restrictive budgets, Sethi advocates for a spending plan that allows for both essential expenses and guilt-free indulgences. Sethi’s conscious spending plan divides take-home pay into four categories:
- Fixed Costs (50%-60%): These are your essential expenses such as rent or mortgage, utilities, groceries and transportation.
- Investments (10%): You allocate a portion of income toward investments to secure financial growth.
- Savings (5%-10%): You build an emergency fund and savings for future goals.
- Guilt-Free Spending (20%-35%): This is money set aside for personal pleasures without guilt.
This approach ensures that essential needs are met while also allowing for enjoyment and future security.
Dining out or ordering in could fall into your “guilt-free spending” category, but it would have to meet the budget percentage allocated for it, and you might find you’d rather spend that money on other things instead, such as leisure activities or new items for home or personal care.
Instead, consider the reasons you tend to dine out and see if you can’t still meet those needs by spending less money. If convenience is the top reason, meal planning and making bulk batches on the weekend that you can freeze and easily pop into a microwave or oven during the week could help with that. If it’s social, consider making food for friends or suggesting a potluck, and so on.
If you budget wisely, you can still enjoy the occasional meal out or ordered in, without the stress of overspending.
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