01.31.2011 / Tips to Trim Your Spending
Are you feeling like your spending is out of control? One way to trim your spending is by creating a budget. In many ways budgeting is like watching your diet, we all know it is something we should do, but temptations make it difficult. And just like dieting, there are many simple little things you can do to trim your spending. Follow these simple budgeting steps and you will be well on your way to saving more money than you thought you could:
Step 1: Understand your fixed expenses.
Take the amount of money you bring in each month and then deduct all of your fixed expenses – mortgage/rent, car payment, insurance etc. These are most likely expenses you have formally committed and won’t change each month. The resulting number is the amount left for utlities, groceries, spending money, savings, debt reduction etc.
Step 2: Track all of your spending.
This may seem tedious, but like watching your diet and tracking calories eaten, it’s the only way to get a handle on how much money your really spend on non-fixed expenses. Ideally, you should track spending for at least three months to account for expenses that may not come up each month; such as doctor visits and household repairs. However, even tracking for a few weeks can help you identify some of those small expenses that add up quickly such as fancy coffee drinks or going out to eat.
Step 3: Look for expenses you can cut out.
After you have tracked your expenses, identify expenses that you can reduce or live without. How many times are you going out for lunch, dinner or drinks with friends? Consider bringing your lunch to work, eating in or have a potluck dinner with friends and family instead. What about your cable bill? Do you really need all 500 channels and that DVR? Consider cutting back your package to a basic package. What about your cell-phone? Are you maximizing the use of your current plan or could you downgrade and save? If you have multiple phones in your household, consider consolidating them into one plan or cancelling the lines that aren’t used often.
Step 4: Define your goals and stick to them.
Now that you know and understand all your expenses and what you can cut out, it is important to have a plan for where your extra money will go. You should have defined goals and stick to them. For instance, you may set out to pay off one or more of your credit cards by a certain time. Or, you may want to save a certain amount by a given time. Whatever the goal is, stick with it. You will really start to see your hard work pay off in no time.
Do you have any helpful savings tips that you can share with our readers? Or, have you tried any of the above tips yourself? Please share.
