Budget leaks can create a struggle to pay bills in a timely manner. And these costs are usually expenses that cannot be accounted for. The weeks go by and you forget to cancel a subscription or you are paying for ongoing services you never use. Money spent at convenient stores and spontaneous spending that adds little or no value to your life, yet drains your budget.
Finding and stopping these leaks may be the difference between living within your means or adding debt to your bottom line each month. Plugging spending gaps can create extra funds that may be used to pay down debt or build a rainy day fund, without impacting your quality of life.
Finding the Leaks
Track Spending. The easiest way to find leaks in your budget is to establish where every penny goes for a 30 day period. While this is not the most pleasant task, it forces you to face the hard reality of where your money goes. To accomplish this either keep a journal of every expense, even the $2 in lottery tickets or the $5 convenience store purchase for a soda and candy bar. The other option is to charge every item on your debit card and make a note on the receipt what it was for and keep the receipts in a box.
Evaluate Where Your Money Is Going. You cannot find wasted spending until you know how your money is being spent. Once the month is over put each expense in a category analyze how the money is spent and create a strategy for reducing waste.
Look For Savings. There are a few areas where leaks are common or strategies for reducing unnecessary spending. These might include:
- Consolidate shopping trips and avoiding places where you tend to overspend.
- Set aside a week or even a month where you have a spending freeze. Then consider what things you really missed and what spending you didn’t even notice.
- Shop with a list. You are less likely to buy extra things if you stick to a set shopping agenda.
- Find a less expensive source of entertainment. Are you paying for premium cable channels or pay-per-view when you could subscribe to Netflix and get the same shows for less? Are free concerts or other entertainment you would enjoy available free or less on certain days.
- Don’t save credit card information at online stores. When you are forced to re-enter your information it will remind you to think twice about your buying decision. Things that are too convenient lead to overspending.
- Earmark money as soon as it arrives. When you feel like you have an “extra” $50 dollars it is easy to waste it. When every dollar is accounted for in the budget you are less likely to splurge.
- Look at memberships and subscriptions and make sure they are used and valuable. Paying for a gym membership or magazine subscriptions when not used is a money leak.
Set A Budget. Once you have trimmed your expenses set a realistic budget and follow it. The closer the budget is followed the better control you have over spending.
Money management is not about forcing you to spend money a certain way, it is about giving you control over spending so you have the financial freedom to allocate funds where they are most meaningful.
Plugging the leaks in your spending will give you more money for the things that are most important to you and your family.