Each paycheck seems to come and go and you still can’t seem to save any of your pay. Looking ahead is great when trying to save for the future, but sometimes you just need to look behind before you can start looking ahead.
Do you know how much you are spending each month on groceries, gas for the cars, cable and internet, water or heating? How about how much you are spending on entertainment each month, or going out to dinner or lunch? How much are all those extra-curricular activities you have the kids signed up for setting you back?
It’s impossible to start setting your goals on saving 10% of your paycheck if you’re not even sure how you are spending the other 90%. In order to save, you need to get control of your monthly spending.
Start with collecting all your bills and receipts from last month. If you don’t have them available, begin fresh this month by saving all your bills and receipts. At the end of the month, add up your bills and entertainment expenses to determine how much you spent. Compare what you spent this month vs. what you made; hopefully you made more than what you spent.
Review what you spent this month and first determine what on the bills list a necessity is each month, i.e., water, heating, electric. These bills should be considered items you can’t live without and you can’t cut back.
Next, review the bills you need, but maybe you can trim the fat a bit. Do you really need HBO, Showtime, and Starz as part of your cable package? Do you need DVR setup in all TV’s in the house? The cable and internet bill is a necessity, but all the extra little packages could probably be cut back a bit.
Once you have reviewed your monthly bills, it’s time to tackle the entertainment expenses. Set monthly goals for you and your family that you will cut your entertainment expenses by 5% month one, by 10% month two, 20% month three, and by 25% month four. Trying to cut luxury items that you are accustomed to is quite challenging. Create incremental cutbacks month-to-month to help cushion the blow. This will also make it seem less drastic than just chopping 25% of your family’s entertainment expenses.
Before you can start saving, you need to understand what you are spending.