This month’s One Minute Money Show is all about how to get rid of spending problems once and for all! If you’ve ever gone on a crazy spending spree, and felt like you couldn’t hold on to your paycheck, this show is for you.
Step 1: Recognize the problem.
You have to recognize the problem in order to fix it! If you spend more than you make, struggle to afford bills, and don’t have financial priorities, these are red flags.
Step 2: Figure out where your money is going.
If you’re not sure what your spending habits are, keep track. Keep receipts, check online banking statements, or carry a notebook for the next two – four weeks.
Then ask: Do you spend more than you make? Does the majority of your paycheck go to non-essentials, i.e. dinners out, entertainment, subscriptions/memberships, junk foods, etc.?
Over-spending on non-essentials may be hurting your financial health.
Step 3: Make adjustments
The experts recommend the 50/20/30 breakdown.
Can you account for your spending in these three categories? I recommend writing this out to help visualize where all of your spending fits in. If your budget is in the positive, GREAT! If you need to make adjustments so that everything fits, try trimming some of the “extras.” Tip: The best places to cut are in fixed costs or flexible spending. Cutting in the financial goals category will hurt you in the long run.
50% Fixed Costs – The expenses that don’t change much from month to month, like rent, mortgage, utilities, car payment, gym memberships, Netflix, other subscriptions.
20% Financial Goals – This part of your budget helps you secure a solid financial foundation, for example, paying down credit card debt, or other debt, saving for retirement and building an emergency fund.
30% Flexible Spending – These are day-to-day expenses that can vary from month to month, like eating out, groceries, shopping, hobbies, entertainment, or gas. You can add any miscellaneous expenses in this part of your budget, just be aware that it must account for only 30% of your budget.
Step 4: Account for all spending in your budget
Make sure all of your spending is accounted for in your budget! Doing this will ensure that you don’t dip into other important parts of your budget.