Time to get on a spending diet

The biggest bite of an American's budget goes to housing and transportation.

(Money Magazine)

Forty-six percent of shoppers had anticipated that they would spend beyond their holiday budgets, an October survey by management consulting firm Accenture found. And it's safe to assume many more have been unpleasantly surprised as the bills roll in.

Just as January is a time of reckoning on the scale, it can also be a time to hit the reset button on spending. The key is to find sustainable cuts that make enough of a difference.

"The latte police have it wrong: Skipping a coffee won't get you to financial freedom," says Brian O'Connor, author of The $1,000 Challenge, which documents his goal of cutting a grand from his monthly budget. "But you can find significant savings by eliminating or seeking cheaper alternatives for things you don't care much about." Ready to commit to a money diet? Use these budget-trimming tactics.

Count your calories

Before you can slash your expenses, you need to know what they are. Rather than striving to document every spent dollar for weeks -- a tedious and anxiety-producing exercise -- make a list that's simply good enough, suggests New York financial therapist Amanda Clayman. Just go through credit card and bank statements to tally your monthly costs as best you can.

Related: How fast will my savings grow?

Then determine what percentage of income goes toward necessities (mortgage, transportation, etc.) and what percentage to wants. Ideally, you'd allocate your money so that you're saving at least 20%, while spending a max of 50% on must-haves and 30% on discretionary costs, says Amelia Warren Tyagi, who co-authored All Your Worth with her mother, U.S. Sen. Elizabeth Warren (D-Mass.). Stacking your spending against those benchmarks can show you where and how much to cut.

Start with meat and potatoes

Take a hard look at your biggest costs -- like your home, wheels, insurance, and food -- before assessing more minor expenses like lattes. As Tyagi says, "If you've got an elephant in the room, don't focus on the curtains."

Re-shop these costs. You may find savings even in seemingly nonnegotiable line items -- like commuting. Someone driving 30 miles roundtrip 22 days a month at current gas prices in a car that gets 22 miles per gallon spends more than $3,000 a year, not including parking. Carpooling could cut those costs in half. While it takes time and an embrace of change to tackle these expenses, the savings can be substantial enough to allow you to drink as many lattes as you please, says Portsmouth, N.H., financial planner Michael Rubin, author of Beyond Paycheck to Paycheck.

Blast a lot of fat at once

Concentrate next on eliminating or trimming regular, automated costs. Reducing a monthly bill pays dividends: Every dollar you save is really $12, notes O'Connor. Plus, these cuts don't require you to maintain motivation, notes Carnegie Mellon economics and psychology professor George Loewenstein.

Related: Grow a bigger college fund

Cooking at home when you'd normally order in Chinese requires a sacrifice every time you get the urge. Ditching cable in favor of Hulu Plus or finally unloading that musty old storage unit demands action only once -- and either move could save you hundreds a year.

Cut back on empty carbs

Reducing day-to-day discretionary spending is where we tend to feel deprived. For best results, maintain the small luxuries you love, such as movies or manicures. Instead, focus on trimming spending you don't care much about, O'Connor says. Watch for upgrades that don't make much difference in your life. For example, do you really need premium toiletries?

To figure out what's truly important to you, go all-cash for a week. Using paper money -- instead of credit or even debit -- forces you to pay attention to costs and prioritize your purchases. It also keeps good intentions from being derailed by impulse buying.

"Cash never sends you a bill," says Tyagi. That's something most of us will appreciate this month.

Where Americans spend their money

Housing and transportation consume the biggest chunk of a family's budget.

33%	17%	13%	10%	7%	5%	5%	10%

NOTES: Retirement refers to employer plan contributions, private pensions, and Social Security payroll tax; not IRAs. Miscellaneous includes education, gifts, donations, life insurance, alcohol, tobacco, and other assorted expenses. Percentages are average of annual spending. SOURCE: Bureau of Labor Statistics

First Published: January 13, 2014: 6:07 PM ET

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