Welcome to our series: Twelve Months To Financial Fitness. As the glitter from the holidays gives way to financial regret, the time has come to vow yet again not to overspend. Each month we’ll share tips for getting your finances in order during 2021 Over the next 12 months, we will provide you with personal challenges to help you on your way to a financially fit new year.
For January, we take a look at analyzing your spending. Spending analysis is much more than setting a budget. It’s taking an honest look at where your money is really going, figuring out where it should be going, and then getting it there.
Do You Know Where Your Money Is Going?
Unless you are checking your bank account after every purchase, you may not realize how much you are spending. It’s easy to swipe cards, send money via payment apps, and sign up for “free trials” that end up in recurring subscription fees. Left unchecked, these transactions can seriously drain your bank account, limit your ability to save, and rob you of fun expenditures like traveling!
Here are some ways to check your spending:
1. Ask your bank. Many online banking services offer budget tools and expense tracking. Spend some time setting up those tools so they can work for you. Most have graphs or pie charts that can break your spending down by category or merchant.
2. Find an app. There really is an app for that…several, in fact. Many apps today can review your spending, tell you where you are overspending, and even cancel subscriptions you may have forgotten about! Just make sure to do your research and only use an app that has stellar security measures and is transparent about how your data is used. Some apps are even endorsed by major financial institutions.
3. Review your statements. You can also go the old pen and paper route. Print out your bank statements and carefully go over each line. This will take more work, but you can be sure you’ll know exactly how much you are spending and where. You may be surprised at what you find.
4. Comparison shop. Any monthly bill you have, such as internet or cell service, can likely be lowered. If you haven’t looked at other providers lately, you should. Look around for better deals, free quotes, or even call your providers to see if they can lower your bill.
5. Add it up. For discretionary spending, such as your daily coffee run or nights on the town, add those costs up. Find out how much you are paying per month, as well as per year. The numbers may shock you. If you cut that spending in half, how much would you save, and what could you do with that money? Cutting costs does not have to be painful either, it may be as simple as changing where you get coffee or what type of outings you take. Be creative, find more affordable options and watch your spending drop!
Now that you have a few different ways to analyze your spending, let’s do it! For this month, take part in our financial challenge to analyze your spending habits.
Step One: Use one of the methods above to create a full 12-month snapshot of your spending.
Step Two: Pick at least one bill to lower, then search for a better rate.
Step Three: Pick at least one type of discretionary spending and commit to cutting that in half. Keep track either by regularly checking your statements or by using an app of choice.
Step Four: Cancel one subscription. No excuses, simply pick one and ditch it.
Optional: Calculate how much you are saving and set an automatic and recurring deposit for that amount from your checking account into your savings each month.
Remember, this challenge can be (and should be) repeated throughout the year. Set a goal to cut a certain amount of your spending each month, and decide how you are going to use that extra money. If you aren’t sure, we’ll have ideas for that money in upcoming articles.