While setting a budget is an important part of cutting expenses, it’s just the first step. Analyzing your spending will help you look beyond where the money is going and help you determine whether you’re putting it in the right place.
Analyzing spending is important because it catches the little expenses and impulse purchases that aren’t factored into your budget. Over time, these “extras” can add up to big money and make it harder to budget for big-ticket items or save for the future.
If it’s time to analyze your spending, these tips may help:
Keep Track of Everything You Spend
Include service fees and purchases made from your discretionary spending fund. Add these up at the end of each week, and do a full month’s overview as well.
Find an App
If you don’t want to go the pen and paper route, there are plenty of apps available to help you review your spending or alert you when you’re over budget. Some will even cancel subscriptions you may have forgotten about. Make sure the app you choose is highly rated and has a clear statement of privacy and security.
Download Your Annual Spending Report
This report is often available annually, for both debit and credit cards, through your financial institution. Typically, your spending will be broken down by categories, such as gas, groceries or entertainment.
Compare providers of monthly services, such as cable or cellular service. If only one service provider is available in your area, perform an analysis of the available plans to see if you could find a more cost-effective option.
Look for Discretionary Spending Cuts
This period of social distancing and isolation may help determine what discretionary spending you could live without. Add up the amount of money you would have spent on coffee, eating out and entertainment outside your home during a typical week. Consider making changes to your daily activities that would allow you to put this money toward paying off debt, saving for the future or making a major purchase.