August 2013

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Where Does My Money Go? Seal those invisible budget leaks today….

You’ve likely heard how much water a dripping faucet wastes, adding up to big dollars down the drain. The same goes for those little leaks in your daily spending. By fixing this problem, you can channel your hard-earned money towards your real priorities.

But do little drips really matter? Definitely, since these mirror expenditures add up.  If you have a set budget – but never make it to the end of the month – or you ask yourself, “Where does my money go?” now is the time to fix your spending leaks.

Eyes and ears open

Chances are you already have a gut feeling about where the problem lies.  For example, do a quick “flashback” of your day. You may realize that you bought a gourmet coffee, paid for a taxi because you were late, or made unplanned purchases on the way home. Pledge to change these habits.

Since it’s sometimes hard to see our own weaknesses, ask a friend or loved on what they notice about your spending. Be prepared to accept their honest feedback.

Track your spending

If your budget leaks are not obvious, track your purchases for a week or a month. It’s as simple as writing down every purchase, or collecting the receipts and adding them up at the day’s end – a five minute task.  Also, if you have a set budget for household expenses like phone, food and cable, compare your actual bills to your budgeted costs to see if they are realistic. Some of your estimated costs may no longer be accurate.

Study the numbers

Once you’ve tracked your expenses, you can spot the problem areas.  You’ll see how much you spend on clothes or trips to the corner store. You can then commit to reducing un-necessary expenses (see the quick tips below). You may also need to rebalance your budget to better accommodate any necessary, fixed expense, like housing, and living costs, if you can’t reduce them.

Budget or bust

Finally, if you don’t already have a household budget, you really need to prepare one. Find a simple budget tool on the web and input all your expenses for each category for one month.  Once you have the data, work with your family to set achievable spending limits going forward.

With a budget in place, and some effort to mend any spending leaks, you’ll hopefully find money for more important goals, like saving for retirement, an emergency fund or your kids’ education.

Quick tips to plug the leaks:

Know yourself: Avoid situations that put your budget in peril.  For example, if you are a compulsive shopper, avoid the mall or leave your credit cards at home.

Purge the urge to splurge: It’s okay to treat yourself to the odd luxury, but regular impromptu spending is a cash drain. Instead, whenever you are tempted to buy on impulse, tell yourself, “I’ll come back later.” Then, you have time to think about the purchase.

Plan ahead: Most of us waste cash on unexpected costs that just pop up. Plan for them instead. For instance, bring bottled water, pop, or snacks from home instead of buying them on the go.

Make a shopping list: Whether it’s groceries, gifts, or a summer wardrobe refresh, make a list before you go shopping and stick to it.

Seek attention: With a little research, you may find cheaper goods, even for your fixed expenses. Investigate banking plans with lower fees, renegotiate your cable/phone package or monitor flyers and coupons for grocery savings.

Use cash: It may seem old fashioned in this era of plastic, but, withdraw a specific amount of cash for daily expenses and stop spending when y our wallet is empty.  It’s easier to manage your money when you can actually see it.

Excerpts provided by: SFL May/June 2013

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