Capitalize your Income
- Rachael Mora
- Jan 12, 2017
- 4 min read
HOW TO REDUCE EXPENSES, MANAGE YOUR INCOME, & MAKE THE MOST OF WHAT YOU HAVE
It’s amazing how much we spend money on each month, how our paychecks seemingly whittle away until they’re gone and we have no idea where they went, how slowly those savings creep up after bills are taken care of. For us, saving money has a few key tips that help a ton:
1. Figure out a few things you want to save for and dedicate specific funds/amount to them each month.
Some people think this is silly and that cash is cash. However, we love having an account to save for a future home, one for a vacation, one for future kids – it really helps to see where the money is going and to see each fund grow. It also helps to make goals and stick with them (even if it’s just putting a small amount in each one each month).
2. Never miss an opportunity for future investment – even if it makes things slightly tighter financially right now.
This one is key – we put a lot in our 401k accounts. I also contribute to my employee share plan because my company does a match. Those things are free money, guys – if you’re lucky enough to have a company that offers these things, it’s a no-brainer and it’s kind of a silent saver – you’re putting money aside without even really realizing it and the balance will continue to grow year over year.
3. Identify your core necessary expenses & evaluate the rest.
If you could build your life from scratch right now, what would you keep? What would you get rid of? Would you get a nicer car? A smaller home? A bigger home? People tend to accumulate more and more as life goes on and each thing that’s seemingly small adds up to an expensive lifestyle that you don’t even intend to have. Your expenses and what you should spend money on are specific to you, which is what makes all of this so hard for most people – it would be easy if the answer was “Spend $400 on groceries, $200 on clothes, $750 on rent”, etc.” But it isn’t. You’re going to have to be the one to determine where your money should go.
Your expenses will be specific, but here’s a decent start to this:
Cut the extras. Once you’ve identified the things that make you cringe, the things you enjoy, and the things you don’t need – you have to do some eliminating. Cancel the cable if you use Netflix instead. If you’re eating out every night and socialize a ton out of the house, assess whether you have too much space or should downsize. If you spend a ton on car payments and insurance on multiple cars but usually drive one, look into downsizing and using uber or taxis on the less frequent occasions when you need separate cars.
- Cut the recurring bills first – that’s the easiest and is a one time job.
- Once you’ve trimmed your recurring bills to just those that are absolutely necessary or make you happy, you can work on decreasing the fluctuating bills. Turn off the lights to use less energy, work on your health to reduce medical bills, etc.
Which of these things do you use and which do you not use. Also, which of these things do you enjoy using? Look at the items you haven’t used in months or don’t use often. Do you watch Netflix every day? If so, that’s probably a good use of your money. Don’t remember your login info? Probably not the best use. Do you spend a ton on eating out because you love being in a restaurant? Or do you grab fast food because you are too busy and don’t have time to plan ahead? If you enjoy eating out, continue spending your money on it. If you feel like it’s too big of a chunk of your spending and you wish it weren’t, make a plan to cook and home, buy pre-packed meals, and spend less.
Now – which of these things makes you cringe? Note: These are not just the largest amounts. Clearly, a mortgage or rent will be a big chunk for most people. However, if you love your home and are happy in it, that’s not necessarily something that should make you cringe – that’s something that you’re happy with even if it’s a large chunk of money.
List every recurring but changing monthly bill you have (like electric, groceries, car maintenance, medical bills, etc. List an estimated cost for each as best you can.
Look at every recurring and constant monthly bill you have (like rent, car payments, car insurance, home insurance, health insurance, student loan payments, cellphone bill, Sirius radio, gym memberships, weight watchers fees, etc.) Write out everything, even if it’s a recurring $5 a month. List the exact cost for everything you can.
There are so many expenses and areas in our lives that aren’t as necessary as we think. Life is about trade-offs, so if you’ve decided you want more control over your finances and want to save for certain things you have to be willing to make those trade-offs. Some people would much rather have all of the “extra” bills because those items bring them joy, which is perfectly fine, but may mean there is less money for some other things like savings, travel, adventures across the world…
Comment! Let me know what your dreams are, what you’d like to achieve, what is your end goal to all this budgeting. Let me know what expenses you’ve been able to cut! Then go read this post about how to add income streams and maximize your funds to help achieve your goals :D.
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