How to Stop Overpaying for the Basics

John J Bowman Jr Accountant - Paying for the Basics

Households across America are struggling to make ends meet. High housing costs plague many cities. In others, stagnant wages offer little prospect for relief. Many people try to work multiple jobs and reach for just a few more billable hours, but even the hardest workers only have so much time and energy. This leaves people feeling pinched every month, concerned that paying basic expenses will tips them over the edge and into debt.

 

Ben Franklin is famous for the adage, “A penny saved is a penny earned.” With budgets so tight, this adage is truer than ever. The best place to start saving is on the recurring expenses that you resign yourself to paying every month.

 

Rethink Cable

Do you really need cable? If you have an Internet connection, you can save a bundle by cutting the cord and opting for streaming services like Netflix, Roku, and Hulu. Speaking of electronics, are you overpaying for your cell phone? Unlimited service is available for as low as $35/month via certain retailers; if you are paying more than that, shop around for other options.

 

Be Sustainable

Energy bills can leave you broke, especially if you live hot or cold climates. Every degree you lower the thermostat in winter and raise it in summer can save you up to 3 percent on your bill. If no one’s home all day, why pay to keep the place at 75 degrees? A programmable thermostat can help you adjust temperatures according to your schedule. When you head to work, are buses and trains an option? Many Millennials find they can do without cars and the payments, insurance, and gas that keep many Americans broke.

 

Eat In

Dining out can serve up an unnecessary burden on your budget. Avoid high costs and calories by learning some quick recipes to prepare at home. Brown bagging your lunch saves you money and calories. Cook a big dish over the weekend and take the leftover to work. For groceries, forget convenience and shop where you get the best value. Warehouse clubs can save you money if you avoid the temptation to buy more than you use. Be especially careful with perishables. Also, get a coffee maker to make your brew at home. If you like gourmet coffee, you’ll need to invest in gourmet maker, but you’ll make up for the expense over time. If you are stopping by the pharmacy, make sure to get the generic equivalents for both prescription and over the counter medications.

 

Find Low-Cost Entertainment

Unless you’re a monk, you probably need some entertainment now and then. Big movie theatre chains offer discount plans and second-run movie houses provide big savings. There are also great deals for kids.

 

These strategies can save you hundreds every month. That can be enough to fund an emergency savings account or retirement plan. Establishing a cost-effective lifestyle takes planning and discipline, but it’s better than being broke.

Are You Making These Common Finance Mistakes?

John J Bowman Jr Accountant - Personal Finance Mistakes

It happens every month without fail. When payday rolls around on the third Friday of the month, your bank account looks healthy – filled with money to spare, even. With a few easy taps on your banking app, you’ve sent off your rent, covered your electric bill, and paid off a little of your credit card debt. You decide it will be alright if you splurge a little on dinner, a movie, a maybe even a quick weekend trip to the local shopping center. A week or so later, you absentmindedly swipe open your banking app – and stare in disbelief. Your bank balance is practically anemic. Where did all of your money go?

 

Spending Impulsively

Your morning Starbucks latte could be costing you. Crunch the numbers: a venti latte costs roughly $4 a pop. If you multiply that times the five days in a work week, you find yourself with a coffee bill of $20 a week, or a full $80 a month. In other words, the money you spend on coffee alone could have covered your entire grocery bill for a month. Small expenses add up – so avoid making impulse purchases. If you think you might be splurging just a little too often, check! At the end of the month, compile all of your card charges and assess how much you spent on necessary items or services (i.e., rent, food, gas) versus how much you spent on unnecessary treats or luxuries. You might just find yourself reconsidering your coffee budget afterwards.

 

Paying Too Many Subscriptions

Do you really need Netflix, Hulu, Amazon Video, and HBO Go? Probably not. Signing onto a service may seem simple and cheap when you’re in the free trial period, but those monthly fees accumulate quickly. Do an inventory of the subscriptions you have and decide which ones you can afford to cut ties with.

 

Living on Credit

Having a credit card doesn’t give you access to free money! Credit card companies make their enormous profits off of people who make minimum payments and allow interest to accrue. Just think – by leaving the expense of a single small item on your balance, you could end up paying out twice the original price in interest and fees. Believing in the “free money” myth could cost you money; living on credit could leave you bankrupt.

 

Overspending on Housing

You may want the in-building gym or slickly designed kitchen – but can you afford it? According to a report from Harvard’s Joint Center for Housing Studies, over one-third of all American households spend 30% or more of their take-home pay on housing expenses. Most financial advisors set the expense ceiling for rent at 30% of a person’s take-home pay; however, even this might be too high for someone struggling to pay off hefty student loans or provide for a family. Don’t let a nice apartment or charming home lure you deeper into debt. If you do, you might find yourself needing to sacrifice your personal life and stay home far more than you ever wanted to.

 

“Keeping Up” With Others

If all of  your friends leapt into crippling debt, would you follow? The answer might not be as easy as you think. Sometimes, it can be difficult to say no to a weekend trip or fancy dinner – even if you know that the expense would eat into your budget for the month. Make a habit of thinking your budget first, and fun second – or risk losing out on a significant chunk of potential savings.

 

Why Most Budget Attempts Fail

Budgets can do wonders for you and your finances, if they actually work. Many people try to budget, but ultimately give up on it after a few month. There are many different factors that go into the effectiveness of a budget, but a few things stand out as the most common. Here are a few of the most common issues people have with budgets and some tricks for fixing it!

Unrealistic Expectations

A personal budget always fails if you went into it with unrealistic expectations. A budget, no matter how strict, won’t help you bank a million bucks in a few months (unless you have that kind of income). In order to have a budget that works for you, try resetting your expectations. If you are not reaching the savings expectations you wanted, it may simply be because your income and expenses do not allow for it.

No Adjustments Made

Budgets are meant to be flexible. Something that looked good on paper three months ago may not work for you now. Revisit your budget every few months to see if its still working for you. If it’s not, make adjustments! Remember, a budget is supposed to work for you, not against you. As long as you’re able to hit the realistic goals you set, then it’s working for you just fine.

Not Attached to Personal Goals

If you have not attached your budget to personal goals, you’ll be in trouble. It’s hard to stay motivated and accountable to a budget if there is nothing in it for you. If you have a budget in order to save more money, what are you saving for? Tie it to something personal like a vacation, an emergency fund, or funds to pay down debt. The closer your budget is tied to things that you want to achieve, the more likely you are to stick to a budget and make those things happen.

Irregular Spending Not Accounted For

Your budget may seem broken if you have not accounted for irregular spending. Do you only pay car insurance every quarter? Are there months where birthdays/anniversaries/outings happen more than any other time? It’s easy to forget about these instances, but they do factor into your spending. Try reevaluating your budget and factor in all kinds of irregular spending. Then give the budget another shot. It’s better to overestimate spending. The extra money you’ll end up with at the end of the month can be a nice addition to a savings account or to treat yourself for sticking with it.