THE STEP-DOWN PRINCIPLE

The Step-Down Principle is one of my favorite personal finance concepts. A great tool to help you spend less and find more money each month to knock out debt, build an emergency fund, save for a vacation, etc. in three easy steps!  Let's dive in! 

I first learned about The Step-Down Principle from Alena Johnson, Principle Lecturer at Utah State University and creator of the concept. ​She explained it this way: 
1. Imagine a staircase.

• The top step represents 1) your current level of spending in a budget category (entertainment, groceries, eating out, etc. ) OR 2) the most expensive way to purchase something specific in a budget category OR 3) the highest number of times you make a purchase in a budget category.
• The bottom step represents 1) the least amount of money you could spend in a budget category OR 2) the least expensive way to purchase something specific in a budget category OR 3) the lowest number of times you make a purchase in a budget category. 

2. Determine where you are.

• Based on the three descriptions above, determine which stair describes your current spending in a budget category, how much you spend, or number of times you make a purchase in a category. In which categories are you on the top step? 

3. Step down.

• Take a step down from your current spending amount or frequency to free up more discretionary budget money to use towards debt repayment, build an emergency savings, save for a specific goal, etc.

​That is the Step-Down Principle. The idea is you consciously make the decision to take a couple steps down before spending money, which would lead you to spend less than originally planned. The best thing about the Step-Down Principle is you don’t have to go all the way down to the bottom step to have serious savings! Just taking one or two steps down can make a huge difference and you don't have to completely eliminate the things you love to do. 

EXAMPLE: Going to the Movies
The top step represents the most expensive way to see a movie while the bottom step represents the least expensive way. See the example below: 

1. New release, prime time, D-box seats, popcorn, pop, candy.
2. New release, matinee, popcorn, pop.
3. Matinee.
4. Rent a movie from Redbox.
5. Rent a movie from your local library for FREE.

If the top step is what you're currently in the habit of doing, then instead of jumping from step one to step five, try stepping from step one to step two or three. This allows you to save money while still enjoying a trip to the movies. We are more likely successful stepping down than completely eliminating fun things from the budget when trying to find extra money to put towards debt, etc. each month.

EXAMPLE: Eating dinner
Imagine the most expensive way to eat dinner (top stair of the staircase). Let's say that's at a nice restaurant and your meal includes a drink, an appetizer, a main dish, and a dessert. Now take one step down the staircase and imagine the next least expensive way to eat dinner. This could be eating at the same restaurant but skipping the appetizer and dessert. Another step down may be to have dinner at a less expensive restaurant and skip the appetizer and dessert. Still another step may be to eat dinner at home and go out for dessert only. Continue down the stairs until you come to the least expensive way to eat dinner (to cook at home from scratch). This is the bottom step of the staircase.
NOTE: You may also consider the number of times you eat dinner at a restaurant in a month and decide to step down to fewer times in a month. 

DON'T FORGET: The key to success with this personal finance principle is to not expect yourself to go from the top step all the way to the bottom step in one attempt. The best practice is to take one or two steps down at a time and once you become comfortable there, take another step or two down if you're still trying to decrease expenses or find extra wiggle room in your budget each month. Set realistic expectations and you’ll do great!

Use the Step-Down Principle at the grocery store, out to eat, at the movies, or when deciding what to do this weekend. The Step-Down Principle can apply to any area of your budget. It’s completely customizable. Next time you're headed out to eat or to the movies (as per the examples above), stop and ask yourself, “How can I step down what I spend to save money?” 

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​Alena Johnson, Principle Lecturer at Utah State University, is the creator of the Step-Down Principle. If you’d like to see more of her awesome financial advice and tips, check out the Financial Checkup. You can find out more about the Financial Checkup on the Utah Money Moms resource page.