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?