I'll cut straight to the chase: I do not like budgeting. I find it tedious and time consuming, and – despite best intentions or will power – a thorough budget does not guarantee discipline in spending and saving. I find an automated spending review once or twice a year, combined with automated saving habits, eliminate most of the work – and stress.
A quick workaround to maintaining a proper budget is an annual Automated Spending Review. The purpose is to identify what you actually spend, rather than a proscriptive budget that determines what you should spend. Instead of sweating over a "perfect" budget, try this instead.
In the first weeks of each year, review bank and credit card statements from at least the previous 6 months to identify and note all recurring and/or automated spending. (Tip: reviewing statements from the previous 12 months will give a leg up on tax filing prep.) This includes non-discretionary expenses like phone bills, insurance premiums, housing expenses, and utilities, as well as discretionary expenses like streaming subscriptions, donations to charity, and contributions to retirement accounts.
While not as thorough as a proper budget, a review of automated and recurring expenses is a quick and simple way to identify spending habits and opportunities to save. The first step is to simply identify recurring transactions and calculate the average monthly spend.
The second part of the process is determining which of those recurring expenses, if any, could be reduced or eliminated. It might seem nice to have all options available at all times, but in truth many of our monthly expenses could be reduced or eliminated without any meaningful impact on quality of life.
Reduced – companies spend more money acquiring new customers than to retain existing customers, so it is in their interest to keep your business – and make you feel appreciated. Nearly every type of service offers periodic promotional rates or features to keep current customers happy – the trick is that you need to ask! For example, you can ask your credit card company for a lower Annual Percentage Rate (APR). No special excuse is needed, and often a 5-minute phone call can improve the APR* for 6 months or more. Similarly, you can call your cellular service provider to ask if a cheaper plan is available that meets your needs.
Eliminated – like most modern people, you may have services or subscriptions that overlap in utility and/or personal benefit. For instance, Apple Music and Spotify more or less do the same thing, yet people often subscribe to both. If one service gets more use than the other, try temporarily eliminating the under-used one and note any impact on quality of life. If none – or if the impact is negligible – the service and expense that can be permanently removed. Is there a movie or television streaming service that you use only once in a blue moon? Is there a magazine subscription that goes largely unread? Try canceling that service and see if you notice.
While a thorough budget is a great tool for increasing awareness and improving spending habits, it is best suited for people who do not mind pouring through bank statements and making spreadsheets. For everyone else, a periodic review of recurring and automated expenses can be a lower stress step in the right direction.
Timothy Iseler, CFP®
Founder & Lead Advisor
Iseler Financial, LLC | Durham NC | (919) 666-7604
Iseler Financial helps creative professionals remove stress while taking control of their financial futures. As both advisor and accountability partner, we help identify current strengths and weaknesses, clarify and refine your long-term goals, and prioritize understandable, manageable, and repeatable actions to bring long-term financial well-being. Reach out today to take the first step.
* Annual Percentage Rate, the percentage that a lender charges annually as interest payments in exchange for lending money.
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