Use This Method to Reduce your Monthly Expenses
If you wonder where all your salary went by the end of the month, you aren’t alone. Americans everywhere live paycheck-to-paycheck leaving them nothing left end of the month. Usually, this is due to overspending, which can be fixed by reducing your monthly expenses.
But how do you lower your expenses when you feel like every expense you have is ‘necessary’? Use this simple method.
Track your Spending
We are all programmed to assume every bit we spend is a ‘must.’ We ‘need’ that Starbucks or we ‘need’ that subscription. When you look at the big picture though and see how much you truly spend, you might realize those needs aren’t practical.
The method to reducing your expenses is to see where you spend it because chances are that you don’t know.
Until you pull your financial statements, you won’t know how much you spend. But the minute you look at the last 6 to 12 months of spending, the lightbulb will go off.
How to Track your Spending
The method is also knowing how to track your spending. This means tracking every penny you spend too, not just the large expenses, but even the small ones.
Start by pulling your financial statements for the last 12 months. Write down your spending for each month and begin categorizing your expenses. For example, you may have housing expenses, vehicle expenses, food expenses, shopping expenses, entertainment expenses, and more.
Everyone has different categories of spending; you decide how you spend and categorize them accordingly.
Look for Categories you Overspend
As you categorize your spending, look at categories that have higher spending than others. Obviously, housing will be your highest category, but what about other non-essential categories?
Start combing through those categories to see where you might be spending too much and zero on those categories. For example, if you find that you spend too much on dining out, look at where and when you dine out most often.
- Am I buying lunch at work too often?
- Do I make too many coffee shop stops?
- Do I eat dinner out too much?
Focus on where you can cut back. For example, if you buy lunch every day at work, consider bringing a brown bag lunch 3 – 5 days a week. To start, bring it a couple of times a week, but then slowly work your way up. If you save $20 a day five days a week, that’s $100 a week and $400 a month!
Look closely at each category and see what you can cut out or at least cut back on. A few examples include:
- Subscriptions you don’t need
- Gym memberships you don’t use
- Impulse shopping
- Club store memberships
Reducing your monthly expenses isn’t as hard as it seems. It just takes a little time to figure out where you can cut back and what you can do without. At first, it’s going to feel like you have to sacrifice, but once you see how much you can save just by making little changes, you’ll be motivated to do more.