One of the things I did this month was take a look back on my personal finances for the last year and saw where I spent money and what adjustments I can make to save more money going forward. Since the ideal goal is to have complete financial freedom, accounting for spending and finding ways to save money is usually at the top of my list for helping me reach that. If you’re looking to get your spending under control or save money or any similar financial goals this year, I recommend taking these steps to kick start you in the right direction.
Analyze your spending
We can’t go forward without first knowing where we’ve been and what we’ve been doing. The first thing I did was log into my online banking. My bank has a feature that allows me to track spending by categories. I basically set all the categories and then the program does the rest as far as assigning purchases. It can usually tell what goes where, all I have to do is double check it to make sure things are going to the right places.
Next, I chose to analyze my spending from 01/01/2018 through 12/31/2018 and waited for everything to populate. It took a few seconds but then was able to show me the total amount of money going in to my account for the entire year, and the total amount of money that came out. The total outgoing was then broken up into each of the categories I had previously set up (loans, gas, groceries, restaurants, insurance, etc). Basically it works like Quickbooks but for your personal banking. Let’s talk about a reality check here. Seeing those numbers on the screen was sobering. I mean I have a general idea (or at least I thought I did) of what I’m spending each month in most categories, but seeing the annual amounts just makes everything so real. Like, did I really spend $5,000 last year on food (groceries and restaurants). It may or may not sound like a whole lot but then, it breaks down to about $420 a month. What am I buying? The grocery portion does include household items and hygiene so I know the numbers are skewed a bit but still. It felt like the number one area where I could cut down. Now that I know what number I’d like to stay under monthly I can pay more attention to how I’m spending on food and make sure that once I hit my limit I’m done for the week. Then I went down the list of each spending category and decided I was going to cut down on each one that I could.
Review and shop your insurances
My next largest expense was insurance. I have been loyal to my auto insurance carrier since I switched to them back in 2008 (ten whole years!). I noticed that at my last renewal my premiums seemed to jump way up but I didn’t make any changes at the time. But at this most recent renewal it got out of hand. I decided to go ahead and shop not only my auto policy but my homeowners as well. A few of the quotes I got were about $100 or so less for the 6 month period, but then I was able to quote with Progressive who cut my premiums in half! I also saved about $300 over the year on my homeowners policy. This one change brought my over $300 monthly payment down to $200 a month. I can see myself doing this each year to make sure I’m not just throwing money away on items I could be saving on. I would encourage you to do the same.
Miscellaneous Items
For me, insurance and the food expenses were my big areas I was able to make cuts. My other bills like utilities and internet stay pretty fixed from month to month. I did enroll in a fixed rate electricity plan instead of a variable rate, and my provider was also offering some cash back incentives as well. This is another item I would look into to see if your carriers are offering anything similar.
Even freeing up a couple hundred dollars a month is a great way to get a new year started off on the right track. Those extra funds can go towards building up your savings or putting towards other goals you may have such as vacation or home renovations. It may feel hard at first to cut down on your expenses, but over time spending less will just become part of your habit.
What are some ways that you cut back and save in your budget?