Preparing a monthly budget is a necessity for most households. But when you’re planning your budget you’ll discover monthly expenses can soon add up, even if you have a larger than average income. Organizing your finances is a healthy first step in budget planning. So, let’s explore the all-important process of analyzing your monthly expenses.
Fixed Versus Variable Expenses
Regardless of the size of your income, you will have many monthly expenses that quickly add up. Many of these expenses are fixed. Understanding what these fixed expenses are can help you plan your budget accordingly.
Let’s start with your fixed monthly costs. These are the common expenses you incur simply living your life.
Fixed monthly costs include:
Mortgage payments or rent
Your mortgage or rent payment is likely your largest expenditure. Since it’s the largest line item within the budget, make sure you use your housing costs as a foundation for analyzing all other expenses. This is one expenditure that will likely grow, so track your housing costs regularly.
As with your housing costs, your utility costs will rise with time. Track exactly how much you’re spending on electricity and water each month. Then you can catch when you’ve been overcharged for a bill.
Analyzing your home insurance bills will also tell you more about your coverage. Are there insurance products you’re not capitalizing on? Carefully review your home insurance costs to see if you’re getting full value for your policy.
Like home insurance, car insurance is unfortunately one of those necessary expenses. Review how much you’re spending each month. Then call your insurance company directly to learn more about your rate. You can often negotiate a lower rate if when your driving habits change.
Cable television bills
Examine your cable television bills closely. With the increasing streaming options, you’re likely extending your budget on cable entertainment. Review your full cable costs and consider either choosing a more affordable cable provider, or a streaming option available at a fraction of the cost.
Your phone bill has also doubtless risen in recent years as companies capitalize on the value smart devices bring to our lives. Calculate how much you’re spending compared with your cell phone use. You might find you don’t need added costs such as long-distance calling.
Grocery costs are a burden for any modern family. And it’s becoming increasingly difficult to afford a simple trip to the store. Keep your grocery bills and then analyze them carefully. Look at how much you’re spending on each item. You might be surprised how much you save when you cut out treats and high-end meal options.
Now it’s time to review the variable expenses. We’ve each experienced the feeling of having an unexpected bill. They usually arrive at the worst possible time. Plan for variable expenses and place these potential costs into your budget.
Variable expenses can include:
Meals out can quickly become costly. Take the time to review your spending on restaurant meals and you’ll soon find extra money to enhance your budget.
Personal hygiene items
Whether it’s cotton pads or dental floss, there are small personal hygiene items that soon become a large line item in our budget. Consider how much you’re spending and determine whether your brand is the right price for your budget.
Pet food and treats
Your pet deserves the best food you can buy. But do they need lots of treats? You may find you’re spending more on your puppy’s new organic treats than you expected.
One time home purchases such as furniture
Review those spur-of-the-moment big-ticket item purchases. You’ll see that springing for the newest sofa can have a significant impact on your spending for the month!
Payments for services such as cleaning
Your home services are another important budget item. Review how much you’re spending on items like dry cleaning and pet boarding and determine if other companies might offer better value.
Debt payments owed to family members
It can be difficult to owe money to a family member. Make an action plan to pay them back as soon as possible. Discuss the debt with them directly and try to modify your payment plan if you’re experiencing budgeting challenges.
Debt payments to credit card companies
Pay credit card debt as soon as you can. The interest on this debt is often enough to impact your ability to pay all your other debts. Review your credit card statements closely to determine how much you owe and to which companies.