Looking for Money Leaks in Your Budget
One of the most important things you can do for your finances is to plug leaks in your budget. Your monthly budget might have a surprising number of leaks in it. If you want to more effectively save money, you need to identify the areas where your income is leaking from your budget. Here are some things to think about as you identify money leaks:
Where is Your Money Going?
The first thing to do is know where your money is going. Track your spending for a month or two. Personal finance software, or a web application, can help make this process easier. You can easily get reports of where your money is spent.
In order for this to be effective, you will need to record what you spent your money on when you get back from the store. Look over your receipts and categorize your spending. I like to break a category, “snacks,” out of my food spending so that I can see what foods are necessities (“groceries”), and how much I’m spending on junk food. You can do this with a number of spending categories. At the end of the month, look at where your money is going.
Are You Spending Money on Unimportant Things?
Your next job is to see what you are spending your money on. Are the items you buy important to you? Or are they unimportant to you? In many cases, money leaks represent items that you don’t need — and that you may not really even want. Also, look for items that don’t really help you reach your goals, or that you don’t use very often. When was the last time you read that magazine? Why are you still paying a monthly subscription fee? Do you really watch 500 channels of TV? Maybe you can downgrade your TV package.
Figure what is important to you, and examine your motivations for buying what you do. If you give it some honest thought, chances are that you will discover that you are spending money on a number of items that aren’t all that important to you. Indeed, many experts estimate that the average household wastes 10% to 15% of its monthly income. That’s a fairly substantial amount of money. Check through your spending, and see what you are wasting your money on.
Just looking over your receipt once you get home, and trying to remind yourself of why you bought something can be a real help in waking you up to your impulse buys, and considering why you bought something. Keep the receipt for two weeks, and then go back and see which items you are actually still using, and glad you bought. You might be surprised at the things that you don’t care about, even after two weeks. This can be another good way to identify your problematic spending habits.
Change Your Habits
Once you have identified your money leaks, it’s time to do something about it. Make a plan to cut back on the things that are sucking your budget dry. Look for ways to cut back by canceling subscriptions, reducing what you spend on eating out, and impulse buys. If you spend more conscientiously, you will find that you start saving more and spending less, and that your budget has fewer money leaks.
Similar Posts:
- How to Avoid the Too Much Shopping Debt Trap
- Why you Need a Budget if your In Debt
- Ways to save money on food preservation
- Do You Have Good Credit? Try These Rewards Credit Cards
- What’s the worst homemade gift you ever received?
Recent Comments