Blog 2 - Recognize Overspending & Cut Back
Last time we spoke about the importance of understanding your money in order to be successful in planning financial goals. In my previous blog I recommended a great spreadsheet to help with tracking and categorizing expenses. If you missed it, catch up here. Keep in mind it will take some time to get a real grasp on your finances but if you only logged the past month that is OK too! You will already start seeing a lot of useful data.
If your goal for 2023 is to “put $300 a month into savings” but once you started tracking expenses you realize you don’t have $300 leftover after paying bills, you need to make changes. To figure out how much “extra” money you have each month you’ll need to subtract your expenses from the total amount deposited into your account from paychecks. However, this could also be the amount you are overspending! Eek! Could that be why you feel like you’re living paycheck to paycheck or struggling to catch up? If saving money is your goal but you find it’s not easily attainable, you’ll ultimately have to 1.) cut back spending 2.) increase income or 3.) both. This blog will give some tips on how to recognize overspending and cut back.
When entering your expenses, the first thing I look for are unrecognized charges. You want to know where every single dollar is going so if something is questionable highlight it or write it down on a notepad and figure it out! Sounds obvious but I’ve definitely found items I had no idea what they were until asking my spouse. Once clarified, you’ll be able to put it in the correct category designated on your spreadsheet.
Next, look for automatic payments. I can almost guarantee you will have some payment coming out of your account each month that you didn’t even know about. It could be for an app on your phone you downloaded years ago or a subscription to a service you no longer use. It will probably be a small amount, maybe just a few dollars, and that’s why you never noticed it before. Start a tally of these charges too so that you can find out what they are for and cancel them right away if they aren’t needed!
Take a look at services you currently have and ask yourself how you can save on them. Perhaps you don’t need those extra channels on cable or maybe you don’t need cable at all. Are you paying for a landline you don’t even use? Do you need the unlimited plan on your cell phone, or can you reduce it? Making just a few changes could add up to hundreds of dollars in savings over the year!
Did you know that you may be able to negotiate bills? It’s true! A lot of companies would rather give you a deal than lose you as a customer. Don’t be afraid to call and ask! Designate 15 minutes a day for a week to make some phone calls and get some bills knocked down! Here are a few tips when calling: 1.) Be friendly - this is of the utmost importance. They hear a lot of complaints each day. If you are nice, you are more likely to get someone genuinely wanting to help you. 2.) Be clear about your intentions. Saving money is your goal so ask them if there is an alternative plan to what you currently have that will reduce your bill otherwise let them know you will have to cancel. They may present an offer for something additional to what you already have, for free. This may not be a bad thing but if saving money is your goal - stay focused! 3.) Come prepared with competitive offers. If you know a competitor has a better rate or is offering a deal, see if they will match it. 4.) Be willing to say goodbye to your service. If negotiations can’t be made, just cancel if you decided your family doesn’t need it and add that amount to your savings.
The more data you add to your spreadsheet the more understanding you will have of your expenses. When you first thought about the cost of owning a vehicle you probably thought about your car loan and gas, maybe insurance, but did you think to account for all the additional fees that come with owning a car? There is also maintenance - like oil changes and new tires, travel expenses such as tolls and parking. Those all add up and should be included in your vehicle category. These fees may not be the exact same each month but when you have a year’s worth of data you can take the average to find your monthly budget for the next year.
See where I’m going with this? This is how you set a budget for yourself! A realistic, budget you can work with! And this is how you can be honest about your financial goals and reach them!
If you find that you are spending more than you thought on groceries or take out, I have some tips for you there! Be sure to check out my next few blogs about meal planning, meal prepping, and smart food shopping!
