What Is Discretionary Spending? How You Can Reduce It and Save More
Discretionary spending is non-essential spending that isn’t mandatory for your basic needs, like shelter, food, health care, work and personal care. Many expenses are essential, but discretionary spending could get dropped from the budget, and you’d still get by.
Read: 3 Ways Smart People Save Money When Filing Their Taxes
Whether your budget is tight or you want to build your emergency fund or other savings, reducing or cutting out discretionary expenses can help you cover essential expenditures or free up extra cash. Here are some examples that can help you better understand discretionary spending and some easy ways to reduce these non-essential expenditures.
What Is Discretionary Spending?
In personal finance, discretionary spending is money used for wants, rather than essential spending for basic needs.
What Are Some Types of Discretionary Spending?
Three good examples of discretionary spending are entertainment, hobbies and travel expenses. Most expenditures in these budget categories are wants. However, some costs related to work travel would be considered essential rather than discretionary, like gas for your daily commute.
Good To Know
A discretionary expense for you might be essential for someone else. If you don’t own a car and live too far from the store, a grocery delivery fee might be an essential expense, while it would be discretionary for someone who can drive to the store.
Some other examples of discretionary spending include:
- Gym memberships
- Salon services
- Streaming subscriptions
- Internet service not required for work or school
- Home décor
- Warehouse club memberships
Some Not-So-Obvious Examples of Discretionary Spending
Some spending is a mix of essential and discretionary, such as with the following purchases:
- Buying more than you need of an essential item, such as a house, car, clothing or food
- Using more electricity, water or gas than necessary
- Eating out rather than cooking at home
Reducing Discretionary Spending: Ways To Save Money on a Tight Budget
Regardless of how tight the budget gets, you have some bills that you must pay. The best way to ensure having enough money for these essential expenses is to cut back on discretionary spending. The following tips can help reduce the budget until your financial situation improves.
Plug Small Budget Leaks
Watch for all the small expenses that alone seem harmless but can quickly add up to a significant amount by month’s end. Consider things like bank fees, seldom-used streaming services and delivery fees. Take steps to reduce them or cut them completely.
Control Impulse Spending
Unplanned purchases can also harm your budget. You may typically leave a little room in the budget for impulse buys, but avoiding them can be a great source of savings. Whether it’s some extra food item at the grocery store or a new shirt you spot while browsing online, if you didn’t plan to buy it before you saw it, skip the purchase.
Keep Food Costs in Check
Food may be one of the easiest budget categories to trim. There are many ways to save, including meal planning around your grocer’s weekly sales and using digital coupons and grocery apps.
Cut back on restaurant visits and deliveries, too. You’ll save on the cost of the food and the tip for your server or delivery person.Â
Find Free and Cheap Sources of Entertainment
Don’t cut out all the fun stuff when the budget is tight. Finding cheaper ways to do the things you enjoy rather than going cold turkey will help you stick with your tight budget.
Don’t Overlook Any Essential Expenses for Which You May Be Overpaying
You need a place to live, and your car may be necessary, but there are still ways to save on these essentials.
Shop for cheaper auto insurance, find a coupon for that next oil change and reduce unnecessary trips to save on gas.
To trim living expenses, look for ways to reduce utility costs and consider renting out that extra room. If you have homeowners or renters insurance, make sure you aren’t overpaying.
Stop Using Your Credit Card
If you already have a credit card balance you’re paying down or no longer have the money to pay off your card in full each month, try to stop using it — or at least use it less. Credit card interest is costly and will only squeeze your budget even tighter.
Takeaway
When the budget gets tight, you may not be able to trim your essential expenses enough to get by. Cutting out or reducing discretionary spending is usually necessary.
Start with the discretionary spending you won’t miss, and then find ways to save money on your favorite activities, hobbies and other discretionary budget categories. Also, remind yourself that any budget cuts are temporary until your financial situation improves.
