Many people end up in debt or financial trouble because they try to live beyond their means. The first step to pulling yourself out of debt or financial trouble is to eliminate this over-spending with a budget. When you use a budget you are effectively living below your means so that you have some money to save, invest, or pay off your debts.

Understanding “Discretionary Spending”

The most common form of budgeting involves tracking and limiting your discretionary spending, but what exactly does that mean? Discretionary expenses are defined as things or services that aren’t necessities that you can live without. Necessities include housing costs, groceries, transportation costs, and insurance payments.

Discretionary expenses may be things you consider necessities that you could actually do without such as daily Starbucks coffee, cable television, or your mobile data plan.

Sort Your Costs

You only have a set amount of net income to spend each month, so it is important to understand what is necessary and what is not. There are two basic types of costs: fixed monthly costs (mortgage, rent, food, transportation, utilities, etc.) that are mostly classified as needs and costs that vary from month to month and usually fall under wants. Ideally you would also put aside a chunk of your net income for retirement, savings, or debt repayment.

You need to list all of your fixed monthly expenses in their own columns, and then do the same with your discretionary expenses (perhaps lumping them into categories like entertainment, subscription services, and miscellaneous).

The image below is an example of a very loose budget that might work for someone, but your budget will need to be tailored to your costs and income.

Evaluate Your Wants

Your discretionary budget only has so much money, especially if you are intending to cut back in order to pay off debt or save for retirement. Thus, it becomes important to understand the benefits and costs associated with every discretionary expense. You need to ask yourself what you get out of spending this money.

Let’s say you have a gym membership that you pay monthly but almost never use. You may want to work out but don’t have the time. It doesn’t make sense to keep paying the membership if you aren’t getting a lot of use out of it, no matter how much you wish you were.

Put it Down on Paper

Planning out a budget is great, but if you don’t write it down with pen and paper or put it in an excel spreadsheet you are more likely to stray from the plan and end up back where you started. Once you write it down it becomes solid and real as opposed to an abstract goal that doesn’t seem pressing. This can cause your commitment to dissipate in the same way new years’ resolutions tend to evaporate.

Additionally, having records on paper will allow you to track patterns in your spending that may help you plan ahead or stop an expensive habit.

Don’t Be Afraid to Make Adjustments

A common misconception is that budgets are set in stone, this isn’t true. While you shouldn’t consistently rework your budget so you can treat yourself with money you don’t have, you should review and potentially update your budget 1-2 times annually.

This allows you to adjust to how your situation has altered. Maybe you got a pay-raise, or perhaps the price of gas has increased again and you need to allocate more income towards that and reduce your discretionary expenses to compensate.


Budgeting is specialized to the individual and requires careful consideration of your situation. A one-size-fits-all approach can be more harmful than helpful in the long-run even if it seems like a quick fix. If you are unsure about what you can do to further budget yourself or simply need more help contact a financial coach.


Bill Rumping is the Debt Expert at Mid America Debt Relief. If you or someone else you know has an outstanding amount of credit card debt contact Bill at (636) 223-5900 or

0 replies

Leave a Reply

Want to join the discussion?
Feel free to contribute!

Leave a Reply

Your email address will not be published. Required fields are marked *