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To tighten your belt is an idiom which means to make financial sacrifices or to cut back on spending. During difficult economic times, it often becomes necessary to economize whenever possible. A household budget may no longer allow for luxury grocery items or unnecessary repairs, for example. A company may have to lay off workers or institute a hiring freeze, while government agencies often cut back on public funding. Whenever it becomes necessary to tighten your belt financially, the overall economy is most likely in a similar slump.
The expression itself refers to the act of tightening one's belt as a result of losing weight, especially as a result of tough economic times. Instead of purchasing a smaller pair of pants, the more economical solution would be to cinch one's belt tighter. When financial circumstances improve and food is more plentiful, the belt can then be loosened accordingly. Belt tightening is generally viewed as a temporary solution to a short-term economic problem. This would be akin to weathering a storm by tightening down the hatches instead of abandoning the ship completely.
The advice to tighten your belt is often triggered by other signs of a economic downturn or financial crisis. A rise in the overall unemployment rate or sudden dip in the stock market can indicate an impending economic crisis which would require drastic measures to be taken. In a tighten your belt approach, the bottom line would be an eye towards an eventual economic recovery. Belt tightening does not necessarily equal financial insolvency or potential failure, just a temporary circumstance which calls for more fiscal responsibility.
Whenever the need arises to tighten your belt economically, many people reevaluate their personal budgets to separate necessities from luxuries. Basic utilities such as water and electricity usually survive the cut, but extraneous services such as cable television or high speed Internet connections may not. Essential food items such as bread, cereal and milk may remain on the household grocery list during difficult economic times, but expensive snacks and beverages may not. During belt tightening times, every purchase or service may be scrutinized for necessity, or less expensive alternatives may be sought.