It doesn’t make sense. You made a budget spreadsheet. You started meal planning to save money. You might have even started tracking your expenses. But the numbers are still showing too much going out than coming in. What gives?
As with making a budget, fixing a “leaky budget” has two parts to it: not enough money coming in and too much money going out.
Income
You can’t magically give yourself a raise at work, so how do you fix a budget that needs more money coming in? The trick is to make sure you’re saving enough. If you’re one car repair away from your budget going up in flames, your budget is leaky, to mix a few metaphors. A sound budget will offer enough cushioning to weather small financial storms. If it doesn’t, you’re still living above your means.
House Poor
One of the biggest “hidden” expenses is housing. You may be “house poor” without realizing it: do your total housing expenses and other debts--rent or mortgage, insurance, condo or HOA fees, utilities, and taxes, car payment, student loans, and credit card debt--equal 36% of your budget or less? Of that 36%, experts suggest no more than 28% go toward the mortgage or rent. If your numbers are too high, you may be paying too much for your housing. Having too high a debt load can significantly impact your ability to create savings, which jeopardizes your entire budget. Consider downsizing if this is you.
Insurance
In the same vein, you may think you don’t need insurance and that you’re saving yourself money every month not paying a premium. But if something happened to you, you or your family could be in even bigger financial trouble. In addition, if you wait until something happens or you’re older, you may have more trouble qualifying, or have higher premiums. If you buy in now you could be doing your overall budget--not just right now, but years down the road--a huge favor. If you’re interested in life insurance, we recommend checking out 20/20 Flex Insurance for no-hassle value.
Savings
Lastly, a way to maximize your income is to go back over your budget and make sure you’ve allotted it correctly. Don’t forget things like Christmas and birthday gifts, savings, and eating out or when you suddenly need the money it won’t be there.
Expense
Impulse Buys
We know you’ve heard not to get $5 lattes every day to save yourself money. What about $5 lunches? What about that $5 latte once a week? Or the $2 americano you compromised on? Are those included in your budget? If they aren’t, you’re leaking. If they are, but you’re still not balancing the way you’d like to, or saving enough, then you might still be leaking! Everyone deserves little things to make them happy, but if it’s at the expense of your financial well-being, you may want to become creative with your strategies. This is particularly true with one-time “impulse buys”, especially if they’re under $20. If you buy two movie tickets here, that kitchen gadget there, and that americano a couple times a week? Suddenly you’re looking at $50 or more that wasn’t in the budget.
Monthly Fees
One hidden expense you might not realize you have are monthly automated subscription services or annual memberships. You probably factored that $50/mo gym membership into your budget, but what about the $9/mo for Netflix? Do you actually watch programming or go to the gym? If not, consider cutting those expenses. If you go to the gym, but only once a week, would switching to a per-visit payment or 10 visits for $X option be more efficient? Or do you need a gym membership at all? Would a one-time expense like a treadmill save you hundreds in the long run? It’s worth calculating. You can find deals on treadmills or even quality used treadmills if you do your research. If you’ve had a gym membership for just over three years at $50 a month, you could own a quality treadmill by now, if running is your thing. Conversely, if you only watch one or two movies a month and the cost of renting or buying them off Amazon digital is less than the cost of Netflix, it might be worth making the switch.
Payment Plans
Another area that expenses add up without noticing is exactly that: when we do payment plans or instalments, we’re more likely to pay more than if we bite the bullet and pay a larger one-time fee. (Another reason it’s imperative to have rainy day funds or savings accounts!) Consider interest rates as the perfect example of this, but it can happen in other ways, like the treadmill mentioned above.
Non-Saving Savings
The savings that aren’t truly savings also add up. If you have a coupon for an item you wouldn’t otherwise buy, you haven’t actually saved any money. Something might be 25% off--but you’re still spending that 75%! Or if you buy in bulk to save money on the unit price but don’t end up using the food, that’s still a loss when you have to trash or compost the spoiled purchases. In addition, set reminders on your calendar to pay bills on time to avoid late fees.
Lastly, in this category, consider that finances are a team effort. If you have a family, make sure they are all aware of and on board with your new spending plans. Otherwise one person could blow an entire budget category in one afternoon without realizing it--or caring. Teaching children and teens financial skills is invaluable to making them responsible adults, so even if you have some hesitancy to share financial matters or think they aren’t mature enough, it’s in your best interest to make sure everyone is playing on the same team financially.
Contact Us
If the categories under “income” are ones you could use help with, contact us to see how 20/20 Flex could save you money or help provide that emergency fund, or give us a call at 1-844-974-2020 to connect with an agent.
