Week 11: Identifying and Plugging Spending Leaks
MONEY SMART CHALLENGE
Money Smart Weekly Conversation Fact: Disposable Income is the money you have left over after paying for your basic necessities. We all have it and most of us don’t know where we are spending it.
If you don’t know what you are doing with your Disposable Income, you probably have spending leaks you need to plug so that you can redirect your money into the areas you want it to go. Even if you can afford to blindly spend your money, if you knew where it was going, you might want to make some changes.
For example, if you work full time, you can justify spending money on eating out and socializing to relieve stress. But, the question is, how much money each month do you feel comfortable spending on eating out and socializing? How much money can you afford to spend on those activities, if you have a higher priority goal for your money like saving for a car or a home or a washing machine?
To find out where your “Disposable Income” is going:
Step 1: Keep track of your spending for at least one month. Keep every receipt or carry a small notebook and write down everything you purchase that isn’t a basic necessity. Basic necessities include things like; mortgage or rent, taxes, utilities (but not cell phone or internet or cable) vehicle and insurance, gas, taxi fare, groceries (but not junk food, pop or snacks), prescriptions, childcare, etc.
Disposable Income is the money you spent in these categories:
A) Vacations, camping fees
B) Junk food, pop, snacks, eating out, Tim Horton’s, Starbucks
C) Drinking, smoking, drugs
D) Clothing and shoes
E) Entertainment, hobbies, physical fitness, sports, yoga, books, movies, taking courses, etc.
F) Technology (TV, computers, cell phones, iPad, xbox, computer games, internet, etc.)
G) Buying possessions, subscriptions, household items, home improvements, décor, etc.
Step 2: Download several copies of this Tracking Sheet and enter each item.
Step 3: Take a look at each thing you spent money on and ask yourself these questions:
Did I need it? Was it a good price? Did it bring me joy? Would I buy it again?
Then rate each item:
1) I wish I hadn’t bought this/used my money for this
2) This was not my best decision
3) It’s okay
4) I’m so glad I got this
5) This is the best thing ever
Think about why you bought this or spent money on this and make a note for yourself on the Disposable Income Tracking Sheet.
Step 4: Calculate the total amount you spent in a month in each Disposal Income Category (A to G) and then ask yourself these questions:
1) Am I surprised by any of the amounts in any category?
2) How comfortable do I feel with the amounts I am spending in each category?
3) Do I plan to make any changes to my spending as a result of this exercise?
Secret Money Suckers: Where does your money go when you’re not paying attention?
(Katrina Clarke • CBC Life • http://www.cbc.ca/life/personalfinance)
There’s that magazine subscription you’ve been meaning to cancel, that growing monthly cell phone bill, that daily latte and that gym membership you’ve neglected all year — costs that can add up quickly. So why don’t we stop them?
“The reason many people don’t stop money drains is time,” said Jordann Brown, a personal finance blogger with My Alternate Life. “It takes time to pack your lunch and make coffee in the morning. It takes time to track your spending. Time is a valuable commodity, and it can be difficult to prioritize a boring financial task over (watching) Netflix.”
But if you’re serious about cutting back on costs — turning that fleeting New Year’s resolution into a foolproof plan — here are the best tips for plugging your money drains from personal finance bloggers Brown, Cait Flanders and Kerry K. Taylor.
The drain: Insurance and cell phone costs
The fix: Shop around. Comparing home insurance rates, mortgage rates, and cell phone plans and could save you thousands of dollars. Online rate comparison websites such as kanetix.ca specialize in doing just this. And don’t be bill blind. Open your mail and look at what your actual costs are.
The drain: Rent
The fix: Negotiate. Never underestimate the power of asking for a lower price. Negotiating can be awkward and uncomfortable if you aren’t used to it, but with practice, it will become second nature.
The drain: Your mortgage
The fix: When deciding how big of a mortgage you’ll take on, be realistic. If your mortgage payments are going to eat into your savings for your children’s education or your retirement nest egg, decide if that house is worth it. Experts recommend not spending more than between 25 to 30 per cent of your monthly net income on home ownership expenses, which include mortgage payments, property taxes and insurance.
The drain: Cable or satellite television
The fix: Go without or go for less. Most broadcasters provide on-demand streams of their new episodes online so viewers can catch up if they missed it on TV.
The drain: Your line of credit.
The fix: Stop treating it like your bank account. Resist the temptation to pay off your credit card bills using your line of credit — you’ll only be transferring debt. Some tough love: if you can’t afford it don’t buy it. If you don’t have the money don’t spend it.
The drain: Takeout coffee, lunch or dinner
The fix: Prepare. On Sunday, make a meal plan for the week, buy the groceries you’ll need and pre-prep as much as you can by cutting up vegetables, cooking grains and making sauces. Healthy meals will be much easier to throw together throughout the week with prep out of the way. As for coffee, make it at home or at work. If you don’t want to cut out takeout expenses entirely, track how much you spend for one month. At the end of the month, reevaluate your costs and see if you’re happy with where your money’s going.
START the MONEY SMART CHALLENGE TODAY by ANSWERING this QUESTION:
Money Smart Week 11 Question: What “spending leaks” did you identify that you plan to “fix”?
Now, What Do I do?
Email your answer to the Money Smart Week 11 Question and your full name and mailing address to firstname.lastname@example.org
Your name will automatically be entered into a draw for a Samsung Galaxy Tablet. (a $300 Value!)
You can enter your name once each week for a total of 17 chances to win!
Answer the question anytime before the end of the Challenge on May 28, 2017 and your name will be entered into the draw for a Samsung Tablet.
So, If you missed answering any of the questions for the previous weeks, go to those weeks and answer the question(s) now.
(NOTE! Only residents of City of Camrose and Camrose County are eligible for the draw for the Samsung Galaxy Tablet.)