My fifth rule of budgeting: Audit yourself!

by Nick on August 2, 2010

No budget is perfect – especially when you’re first starting out.  Even if you keep track of your spending for a few months before you try your first shot at a budget it will still take time to make your budget work – months.  And you will still be tweaking it for years as your priorities, responsibilities and other things change.  That will involve tweaking some or all of the numbers over time.  That’s OK.  Don’t give up.  It’s virtually impossible to cut all of the “fluff” from your spending.  But every so often take a look at your budget and and see whether there are any big (or small) expenses that you can cut out.

For me, there were a few items I cut out (or down) after reviewing my budget.  The first one was a gym membership.  I was paying $70 per month.  That didn’t break the bank, but it was a decent-sized expense compared to some other items in my budget.  Even with the $200 gym reimbursement offered by my health insurance every six months (if I use the gym 50 times during the six-month period) it was still over $35 per month out of pocket.  That’s more manageable, but I wanted to take a look at how and whether I could cut that one down – not out, because I did not want to work out from home.  After about a half hour of research I discovered that my current gym was offering a membership for only $30 per month that gave me all the access I needed.  After my $200 gym reimbursement every six months it’s now FREE (they only give me up to my spending, so even though it’s $180 out of pocket it’s not a money-maker)!  Score!  All I have to do is make sure I go 50 times every six months.  What an incentive to work out – free gym membership!  I’ll take it.  I still keep the $30 per month in my budget just in case I do not qualify for the reimbursement, but when I get it I put it right into savings.  Essentially it works out to be extra automatic savings.

Second is one I mentioned briefly before – lunch.  When I was preparing for my budget and writing down everything I spent, I noticed I could also cut lunch down by at least $4 per day.  With an average of 230 days in the office, the $4 per day could save me almost $1,000 per year (after taxes!).  Auditing your expenses and budget could lead to similar savings for you.  It’s one thing looking down at your “food” row and see it moving a little too fast, but auditing what expenses within that are causing the big problems can save you a lot of money.  One of mine was lunch.  And if you’re in credit card debt – you can pay those down even faster.  If not, accelerate your savings.

Third was dinner at restaurants. I think we all have had that problem at one time or another. But one meal out in NYC could pay for an entire week of groceries! Crazy! When my “restaurants” item was larger than my “groceries” one and I only went out to eat once or twice a week I knew something had to change. I have family and friends in the restaurant industry and truly believe that they are a valuable part of the economy – but not my budget. I still go to restaurants from time to time, but I plan for it.  (And I try to make sure I have leftovers to get another meal out of it… It makes me feel like I at least got two meals out of it. I do like a good meal though, so sometimes I don’t quite stop eating in time to have enough for leftovers – but then I just go back to the FREE gym and feel a little better.)

And finally – sports memorabilia.  For those who know me, you know that I have a fairly impressive collection.  Not for long (more on this later*)!  For a few months I was spending quite a few dollars on sports memorabilia – hundreds of dollars – because I found “great deals.”  Incidentally, two of the “great deals” I got are not as “great” now because the players were later suspected of (or suspended for) taking banned substances.  Ugh!  So I cut that out (before the PED issue arose).  I realized that I had enough and it wasn’t worth the time and money – “good deals” or not. 

(*This is one category of “stuff” that I’m selling in order pay off my student loans by the end of 2011.  I likely won’t sell all of it and it won’t get me all the way there, but it sure will help.  So goodbye memorabilia.  I hope you find a good home!  I’m getting out of student loan debt!)

So there you have it.  Auditing my budget revealed hundreds of dollars a month – thousands per year in after tax waste.  And, according to this, starting with nothing and investing $300 per month, with a 7% return, no tax advantages, a 25% federal tax rate, 8% state tax rate and 3.1% inflation will grow to over $118,117.00 after taxes that feels like over $64,000.00 after inflation in twenty years!  It won’t make you rich by itself, but it’s not too shabby for finding less than $10.00 of waste per day…

Is it worth it?  I sure think so.  What about you? 

So audit your budget, put your credit card down and slowly step away from the mall!

{ 0 comments… add one now }

Leave a Comment

Previous post:

Next post: