Budget Checkup, Where Do You Look?

I've said it before and I'll say it again, when you start doing a budget regularly you will be surprised at how much money you actually have. It is not inflation that causes the problem, it is our spending habits and lack of attention to detail.

For the record, I have always been a finance nerd at heart. From my time growing up, I have always been a saver. I purchased my wife's engagement ring by banking almost every dollar I made throughout the summer and then emptied my account to go to the jeweler. Before that, I would count my tips at the end of the night and stash them away in a drawer until I had time to go over to the bank. BUT, once I started working, got married, and started living life a little bit on this much larger income things got a little more out of control, but never too far, just a little. I still watched what I made, and knew what I was spending, but not down to the details, but when I did things started to become more clear.

Where did I find all those extra spending problems? What did we do to change them around?

1) Eating out: I always tell my clients this was our number one area and still becomes a bit of a problem. After all, with 3 kids, sports, and after-school activities, 2 to 3 jobs going at the same time and just needing some downtime, eating out is the easy way out. I believe at our worst we are up to about $800 a month on eating out. Sure our groceries were a little lighter, but with 3 boys getting older and sports running ragged we ate out a good bit. To get control in this area, you must stick to a plan, we cut that back to $400 per month and if we need to go over, it is a choice that we are not going to spend in another area. The total budget still has a cap.

2) Cable/Subscriptions: I'll lump these two categories together now since most do not have cable anymore, but it is still a major watch out. At our peak, this bill got up to close to $300 per month. That was cable, phone, and Internet. I remember when it came in the mail and thought, this has got to stop. We talked it over and decided to make the switch to streaming, got rid of the home phone, and moved it down to just the internet. I do not remember what that meant at the time, but I know my total subscriptions and internet today are about $80 per month. Cable companies are notorious for increasing their rates every year, take the time to set a reminder in your calendar and call them every year to get it knocked down. If you are really in a crunch, but it all out! You can get a lot of free TV with ads for nothing or close to it. This is one area where people can save 100s with very little effort.

3) Insurance: Always, always, always shop your insurance. People do not like to mess with this area because they think it is complicated and they think they are getting a discount for being a loyal customer. Here is the reality. It is not complicated, making the switch is as simple as making a phone call and answering a few questions, then saying yes to the better rate. Loyal discount is short in the insurance world for "sucker." We will give you a discount on our elevated rates because you have been loyal to us. State Farm (in my opinion) is one of the worst here since I have lost out to them. With 2 house claims, they just kept increasing our rates and then when I switched I saved 100s a year after. Shop your insurance around once a year, just to see if the rates have proven to be any better.

4) Rent: Increases here are almost as guaranteed as death and taxes. Rent is going to go up every year and landlords know that moving is a pain in the neck for people, it is costly so they see no problem making increases here. Depending on where you are in your life, this is an area where you can save to set you up for a more stable future. Not everyone needs a home, but it is a good long-term investment for many. If you can deal with roommates, live in a cheaper area, or just make it easier for yourself to switch rentals you can try to avoid some of this. My wife and I did move 4 times within the first 2 years of marriage due to job demands, so I know moving is not easy, but it is an area to keep an eye on to help lock you into a better future. You do not want to be locked into a rental agreement your whole life.

If you are in a mortgage, just sit tight and wait till that rate drops at least 1.5-2 pts before considering a refinance. That will give you a bit of margin. Why wait for that level? Simple, it is going to cost you to refinance, so you want to make sure the investment is worthwhile to save you interest over time.

Those are just 4 quick areas that I wanted to reflect on to help you get control, find some extra money, save more for your future, and allow you a little more margin.

Going forward, dig into your September budget. What are some of those areas that have gotten a little soft? Where can you flex those budgeting muscles to crack down a little and make a little more margin for yourself to save for something more