|My condo, my single biggest monthly expense|
The first step to reducing your expenses is to understand how you’re spending your money. You should already have a sense for where your money goes, but having a precise view gives you a better understanding of whether you’re spending your money wisely.
It turns out that my monthly expenses come out to around $3,150/month or close to $38,000/year. Most of my money goes towards paying off credit cards (always pay off the balance due and do not carry a balance), my mortgage, and my homeowner association dues. A little over half of my expenses go towards housing (building equity and paying interest).
|My monthly expenses by category|
The next biggest expense is my credit card. My credit card breaks down into many categories with about 25% of my expenses going towards groceries, followed by 17% for food/drinks when eating out, 12% for cell phones, 11% for flights, 9% for merchandise, and the rest spread across a number of categories.
|Monthly credit card expenses|
The benefit of this process is to understand where your money goes and where you can reduce your expenses. For example, maybe you’re spending a lot eating out and you should buy more groceries instead, which will save you money. I was pleased to see that most of my food budget goes towards groceries, which is significantly less expensive than eating out.
I personally found it interesting that my cell phone bill was so high. I’m going to look into finding a cheaper plan. I also found that my internet was very expensive and that I could find a better deal by switching to a cheaper and faster competitor. Lastly, I also realized that I was overpaying for my gym that offered more than I needed and that I should switch to a cheaper competitor that offered me exactly what I needed. How are you spending your money and what tweaks will you make?