6 Things You’ll Regret Cutting From Your Budget Just To Save Money

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Budgeting is a healthy way to get your finances in order and prioritize your financial goals. It also helps you see how and where you need to cut back to do just that.

However, while cutting out expenses is a great way to free up money toward goals like saving, investing or buying a home, to name a few, there are some expenses you might just regret cutting in the quest to save money.

Patrick Sabol, a CFP and a senior lead planner with Facet, explained the expenses you might not want to cut.

Retirement Contributions

If you’re looking to dial back on expenses, one area you should absolutely not reduce, if you can help it, is contributions to your retirement accounts, even though that may be a long way off.

“People might think, ‘well, it’s temporary and then I’ll come right back to increasing those things,’ but you might not get around to it. And once we have more money just sitting in our checking accounts, it’s very common to spend more out of habit or psychologically,” he said.

This is especially important if you’re receiving an employer match, he said, because “that’s free money.”

Insurance

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Something Sabol has seen people regret cutting is any kind of insurance, from life insurance to health insurance, particularly self-employed people who pay for their premiums out of pocket.

“I’ve seen people sometimes running low on cashflow and they forgo health, basic health insurance or life insurance and things like that,” he said.

It’s easy to make the mistake that, because you’re healthy or young, you don’t need those things, but, he warned, “Those are the things that can be catastrophic to one’s finances [when] not having the right protection when it comes to insurance.”

Long-Term Savings

A bigger area people come to regret cutting back on is putting away money into their long-term savings or investing goals, Sabol said.

“One of the variables that we have control over when it comes to saving and investing and meeting our goals is time. When we’re looking at our long-term goals, it seems like that’s very far off, I’ll lower my longer term savings or things like that.”

Unfortunately, he said, cutting back here means you also lose out on the compound interest that comes with investing. 

Small Expenses That Bring Joy

One thing Sabol made clear is that your cashflow issues probably aren’t the result of your frequent trips to Starbucks, an entertainment app or other nonessential but small expenses. Sometimes getting too granular in cutting back can deprive you of the small things that bring you joy.

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“There’s nothing wrong with having those things in our life. We all work hard, we all need downtime and you need your mental health time. Cutting out everything that we enjoy is not the best thing to do when working through budgeting or trying to find those areas that we can optimize,” he said.

Instead, he said, look at those recurring monthly subscriptions, your fixed costs and work at it from the bottom up “rather than getting really micro about it and looking at all those little individual line items.”

Professional Development or Educational Expenses

If you’re spending money to improve your education or skills, Sabol said, though it might seem superfluous at the moment, this kind of expense can pay off in spades down the line. 

“If we really want to make more progress, sometimes the best thing we can do is invest in ourselves and hopefully make a higher salary in the future. Sometimes that’s overlooked in goal planning and financial planning, but I think it’s something that even if it’s for a few to make those cutbacks for a few years to go back to school, it’s really important.”

Investments Due to Economic Changes

It’s common when there is economic uncertainty or political change, like the U.S. is facing now with a change in presidential administrations, to make fear-based cut backs around investments, Sabol said, but he said that it’s never wise to make a panic-based decision around your investments. 

“The most important thing when it comes to the market, or any economic policy changes, is to stick to the plan to continue making investments in retirement contributions and adding to your investment portfolio despite where we think timing is heading in the short term.”

Think Priorities and Values

Instead, he said, think about your priorities and values. “If you love cars, and it’s really important to you to have a nice car and you want to have an expensive lease payment, then you might work that into your overall financial plan to where if you’re not traveling as much,” he said. 

Instead of dollar for dollar accounting, he helps clients think more about what they hope to accomplish in their goal setting, which might mean trade-offs.

“We can use financial planning and we can use calculators and we can make some assumptions and do our best to look at how much you need every month to make those things happen,” he said.

Ultimately, everyone’s finances are different, and the best way to make sure you’re on track is to meet with a financial advisor or accountant who can help you assess your situation and prevent decisions you’ll regret.