Budget Basics: What’s in your budget?

If you are ready to get control of your budget you are going to need to know what is IN your budget. Expenses have a way of increasing without us even noticing and over time we find ourselves spending more without even knowing where the money is going.  Our first job is to get a good honest look at our budget and see what’s what.
Task One is to sit down and write down all of your expenses. This includes automatic payments, checks you write and debits. There are two basic ways to do this. You can write them all down on a piece of paper, or if you are a bit tech savvy, create an excel sheet. Either way your first goal is to find out where all of your money goes every month. When you first do this it’s pretty easy to forget one or two bills (I forgot to include my Netflix bill the first time around) so you may need to come back to your list later.
Once you have written down all of your bills accurately (did you account for all of your entertainment expenses?), it’s time to add them up and compare them against your income for a whole month. This can be kind of hard sometimes since a lot of people get paid weekly or biweekly so sometimes you might have two checks to cover your monthly expenses and still have half a week at the end of the month left over. A good way to verify your actual expenses is to look at your checking account debits. However you do it, it’s vitally important that you find where all your money goes each month.
Ideally it would be great to find out that you can pay all your bills with two biweekly pay checks per month because every few months you are going to get an extra check. If you get paid biweekly that’s 26 paychecks per year so there are two extra pay periods per year.  Ok back to your bills. Now that you have written down all expenses we can get to our real objective, which is reducing your spending.

Three easy strategies to reduce your spending

First off you may discover that have a couple of recurring expenses that you can just cancel. When I looked at all my bills (and my checking account) I realized that I still had a Hulu account for $8 per month. I already watch too many movies on Netflix so good bye Hulu! I also noticed a monthly Microsoft payment for $5.99 for an email account that I had not used in over a year. Good bye Microsoft!
The next thing to do is drill down on each bill. When I reviewed my Verizon bill I noticed that I was getting charged a penalty for using too much data. With one call I changed my plan and reduced my Verizon bill by $15 per month. That’s $180 per year! Next I looked at my auto insurance bill. I haven’t had an accident in, well never, and I haven’t had a speeding ticket in nine years so I called Progressive and hinted that I might look around for a better deal. In less than ten minutes I had reduced my monthly insurance bill by $14. All of this was quite easy and really only took a few minutes of just thinking about my bills and making a simple phone call. You will be surprised at how easy this is to do.
The third strategy is to look at how often you have paid late fees or charges on your bills. Paying late fees, overdraft fees, etc. is a complete waste of time and you can read about some simple strategies here

How to never pay late fees again

In any event, paying late fees is really a scam and you shouldn’t fall for it. Why should you pay a $30 overdraft fee for a $1.50 debit? It’s ridiculous. Paying “processing fees”, “late fees”, “overage charges”, etc. may be great for a business but it’s terrible for your budget.
In summary, after I implemented all of these strategies last year, I saved over a thousand dollars per year, and without changing my lifestyle at all. You can do this too, and even before you are actually serious about cost cutting. Good luck!