In the hectic days of regular life, it’s easy for a budget to be a very casual thing. Maybe you’ve set some parameters with your partner, about how you are going to save and spend. Roles and contributions are mapped out, and you think all is going according to plan. You never mention another word about it and proceed with life as usual. This is a very common “strategy”, but it rarely pays off the way a real budget should. This is because people don’t stick to the plan. Your mind may be a very powerful thinking instrument, but it’s not going to keep up with everything you save and spend, relative to your general income, on its own. You need paper and pencil, a spreadsheet, or cloud based budgeting software to get that right. But it all starts with taking a close look at what you spend on any given month. So sit down with your partner, crack open a beer, and take a look at everything you spent over the course of the previous month. Here’s what to look for:
- Payments You Didn’t Know You Were Making. If we have learned anything from the British PPI situation, it’s that you could be making payments, for things you don’t want, without your knowledge. This is a big deal, and it’s why there are dozens of class action lawsuits getting kicked up over Payment Protection Insurance even as we speak. You may not live in England, or have that sort of insurance latching onto your bank account, but there are loads of other payments which get set up for autodraft, then never get cancelled. These can include entertainment, service, subscription, or any other sort of deal that lets you get a thing for money paid regularly over the internet. Some of these are good and convenient, others are meant to keep you paying for months and years, even after you’ve forgotten about the thing you signed up for in the first place.
- Payments You Sort of Knew You Were Making. It’s easy to get in a habit of paying for things you don’t need, even if you are doing so consciously. A lot of times we rack up expensive monthly bills for food and drinks, never to realize just how much of our expendable (and non-expendable) income is getting thrown to these things. Look over your monthly bank statements with a magnifying glass, and determine just how much you are paying for things that you don’t really need. You can cut down your expenditures by hundreds of dollars per month this way.
- Payments You Shouldn’t Be Making. Now look at the stuff for which you are paying dutifully, but do not justify the money spent. These include payments for expensive cars, money spent on a house that is more than you need, and countless other extravagances we spend our money on. You don’t have to become an ascetic. But if you can cut down your monthly spending by 25% or more simply by doing without something you don’t actually need, you’ll cut down a lot of the stress and hard work that goes into making a budget work.