My grandmother always used to excuse her (doctor-prohibited) food indulgences by saying “The little bit I have won’t hurt me.” Unfortunately, that kind of attitude can also plague budgeters and leave them at the end of each month wondering where all their money went. While it seems like a little purchase here and there can’t possibly harm your bottom line, the truth is that even a little budget leak can add up to a big problem. If you’ve been trying to get your finances on track and are having trouble figuring out where all your money goes, here are some ways to find those leaks and plug them up!
1. Track your spending. For some people, a root canal sounds preferable to writing down every purchase you make, but it is a very important facet to budgeting and financial planning. Commit to this exercise for a minimum of a week and get everyone in your family on board. Your tracking could be as simple as carrying around paper and pencil, or you could download one of many tracking worksheets available online. One of the benefits of tracking your purchases is that it forces you to examine your impulse buys. Do you really want to have to write down the $7.00 fast food meal—particularly when you have perfectly good food at home?
How to easily track your spending. You can track your spending with something as simple as a pen and paper or a downloadable spreadsheet. Or you can get more advanced software, including free Personal Capital, You Need a Budget, Quicken, Mint.com, or a variety of free money management software programs.
2. Carry cash. You’re more likely to feel like you’re spending money if you pay for your purchases with cash, rather than by swiping a card. In addition, if you carry only cash, then there is no way to go over budget. This works particularly well for grocery shopping—bring only the $150 you plan to spend for the week’s food, and you can’t be tempted by high-priced convenience foods that aren’t on your list.
3. Figure out if you’re lying to yourself. Sometimes budget leaks come from wishful thinking. If you’re out with friends three or four nights a week, but you only budget $30 a month for entertainment, you’re certainly going to go over your budgeted amount. It’s okay to plan for fun and “frivolous” expenses, as long as you aren’t robbing another account to pay for it. So know yourself and know what you spend money on. If meals out, the theater or great shoes are important to you, then budget for it! As long as you are realistic in your expectations and keep your finances in check, you can certainly afford to enjoy your money. In fact, it can be more expensive to “deny” yourself.
4. Check your regular bills. Things like internet, cell phone and cable can be the source of terrible money leaks. If you are either paying for more services than you use, or going over the plan you have, it’s important to reassess your bills to make sure you’re getting the right fit for your needs. Even little amounts of $10 to $20 per month can really add up over the long term. Wouldn’t you prefer to have $240 in your pocket by the end of the year?
Tips for reducing your fixed expenses:
- You can negotiate you cable bill, cancel cable TV and replace it with a cable TV alternative like streaming TV online
- Use Netflix or Blockbuster to reduce movie expenses: Netflix review, free Netflix trial
- Save money on your cell phone bill
Just like with dieting, budgeting is about being mindful of your habits. To stay financially healthy and leak-free, spend some time focusing on your money so that it doesn’t control you.
Where else can you save money in your budget?
Photo credit: vrogy