Many individuals believe that budgeting is difficult, but the act of budgeting is actually straightforward. To get your desired result, you examine the amount coming in and the amount leaving, and you make adjustments to both. The real challenge lies in adhering to your budget. Many times individuals fail to follow through with their budgets because they struggle to recognize, accept, and change the expenses that are sabotaging them. These sabotaging expenditures are better known as budget killers. If we put in the effort, budgeting may assist in reducing stress, lessening financial concerns, enhancing decision-making, and much more. It's time to start experiencing the full benefits of budgeting by getting these 5 budget killers under control.
1. Auto Loans
Usually, we all require a vehicle for transportation. This necessitates owning a car and maintaining it. The most serious error you can make though is when you look at it as an expense you will continually have. If you do, you might be in debt for quite a while. You are essentially doing the same thing even if you merely lease your automobile. The ideal situation is to pay off your automobile and retain it for as long as it lasts. A few hundred dollars each month will be freed up by not having a payment. Another possibility is that your payment is simply too high. If you have a car payment that is outside of your means, it may be a tough decision, but it may make sense to sell your automobile and get a more affordable one. Ultimately avoid falling into the trap of thinking you need the newest and trendiest automobile every three to four years and instead try to purchase a reliable car when you absolutely need it.
2. Mobile Devices
Smartphones have evolved into an essential that previous generations undoubtedly never had to plan for. Given that they currently cost more than $1,000, iPhones may seriously deplete your financial resources. Normally, you have the option of purchasing your phone in whole or in monthly installments. It is simple to purchase the more costly one while paying for them monthly because the additional cost doesn't seem like very much. However, you should avoid falling into this trap. Try to pay the entire payment upfront when you go to acquire a new phone so that you are aware of the full price. This sticker shock may help you determine if you really want that new cellphone.
If you're in a situation where you need to purchase a new phone, you may be able to save some money by buying one that is at least a year old or buying a used model.
3. Your Home Expense
Your home payment is probably one of your budget's largest expenditures. Whether you rent an apartment or own a home, this payment can quickly deplete your financial resources.
Let's start by discussing rent. If you're a renter, you should pay close attention to your bill and other rates in your neighborhood. Take a close look at the rent you pay, and when your lease it about to renew, browse around for a better deal. Additionally, you may save some money by looking for a small complex. Smaller businesses or private landlords frequently provide more interesting locations at lower prices. Consider also where your home is in relation to your job. If you drive a lesser distance to work, then you could potentially be saving a lot on gas.
Next, let's talk about a mortgage payment. It's critical to determine how much house you can afford if you have a mortgage or are thinking about buying a home. People frequently overextend themselves by purchasing more than they can afford. If you find yourself in this scenario, think about whether it would be more practical to stay in your existing property or to downsize. Even though moving might be costly, doing so may be the best option if you're in a house you can't actually maintain. Other options to consider are using your home to make money for you and putting that extra cash towards your mortgage payment. Can you rent a portion of your house out? Can you completely rent it out and live somewhere for less money? With a mortgage, it might be challenging, but with a little imagination, you can uncover significant savings.
4. Where and What You're Eating
Food is a necessity, so putting it in your budget is non-negotiable. However, there are some instances in which this section of your budget can and should be reevaluated. First, let's talk about eating out. We're not saying you shouldn’t treat yourself to a nice meal out every now and then. But if you're spending $15 a day to eat out for lunch at work or $30 a day to pick up dinner on your way home, this can add up fast. If buying quick meals at the last minute is killing your budget, start working towards avoiding this problem. For instance, think about keeping prepared meals in your freezer. When you don't have time on hectic days, this can be really helpful. Something you already intend to cook can easily be doubled, and the extra amount can be frozen for later. You might even consider bringing lunch to work. This is simple to accomplish by making it in advance and in batches. Last but not least, take control of dining out by designating a certain day of the week to treat yourself. Telling yourself you're going to enjoy a nice dinner out each Friday after work lets you still enjoy the occasion and remain in control.
Not eating out as frequently and preparing your own meals can certainly help your food budget, but even then, excessive spending can creep in. If you are buying items from the grocery store to make your meals but insist on only using the best of the best, you may not be doing yourself any favors. The majority of retail brands taste nearly identical. You will occasionally come upon one that's just not the same, and that's fine. Simple switch back to purchasing the brand you liked before. The purpose here is to be open to trying other brands and think about where your dollar is going.
Last but certainly not least are subscriptions. We’ve all heard it before, subscriptions can get costly, but do you actually know how much you’re spending on them? With the explosion of subscription services over the last decade, keeping track of them can be challenging. For just media and entertainment offerings, the average number of paid subscriptions per consumer was 12 in 2020, according to Statista. Furthermore, most individuals have their payments set to autopay, so the money is automatically taken out each month whether they realize it or not. To further explore how much subscriptions can affect your budget, let’s look at some hypothetical numbers. Let’s say you are just below the average consumer, and you are subscribed to ten of the most popular tv, movie, and music streaming platforms at the lowest subscription rate possible. Let’s see how much that is costing you per year:
Per Month Cost
In this scenario, your total cost per year would be $1,019.04. Now, it’s important to remember that this number isn’t an accurate representation for everyone. Some streaming services offer free trials, discounts for certain groups of people, and special promotions. However, we must also consider that some people have upgraded plans, and taxes and fees are not being calculated in the chart above. Furthermore, many people fail to identify their subscription services. Paying a subscription fee goes well beyond just streaming platforms. If you have a gym membership, pay monthly for an app on your phone, are part of a members-only retail chain, pay for an online news source, have monthly boxes sent to you with food or clothes, or anything else comparable, you have to also factor those subscriptions in. Oftentimes subscription services are eating away at our budgets, and we just fail to notice.
What Should You Do Now?
Now that you can easily identify some of the top budget killers, it’s time to start making changes. Take the tips from this article and consider where you might start cutting costs in each area. After a while, you should begin to see a difference in your budgeted expenses. However, if you feel like you still need further assistance, we are here to help.
At Fourth Avenue Financial, our first priority is your overall financial success, no matter what life events come your way. We want to help you develop, implement, and monitor a strategy designed to address your situation to ensure all your investments set you up for a path of financial success. If you are ready to start planning for your financial future, we are here to help. Contact us today at (304) 746 7977 to schedule a meeting with one of our experienced financial advisors or schedule online: https://calendly.com/fourthavenuefinancial/introductory-zoom.
Securities are offered through J.W. Cole Financial, Inc. (JWC), Member FINRA / SIPC. Advisory Services are offered through J.W. Cole Advisors, Inc. (JWCA). Fourth Avenue Financial and JWC/ JWCA are unaffiliated entities.