As we transition from the summer to the winter months, money may become a more talked about topic in your homes. Spending more time inside may cut down on certain bills, but increase others such as heating your home, and the holiday shopping season. Now is the perfect time to start strategizing how to save your hard earned dollars and guide yourselves into the habit of having better money management.
List Out Your Expenses
Your expenses can vary month to month, which is quite common. The best place to start managing your money is to gather a general idea of your expenses. Creating a quick list of things that you typically spend money on each month is perfect. Make sure to include all your bills, your entertainment costs and anything else that you pay for. It is usually helpful to use a spreadsheet software to stay organized and to outline your expenses digitally. Some benefits of an electronic platform is ease of management, and its ability to assist you in any math. Another great way to stay organized when compiling your expenses is to list them out by the amount. Starting out with the most expensive bill and working your way down to the least will give you a picture of where your money is going. This can also help you later on when you need to take a deeper dive into cost cutting.
Know Your Household Income
After determining the expenses that you and your family accrue each month, the next step is to list out any sources of income. Be sure to include your primary sources of income along with any side hustles you may have. You can even place these into your existing spreadsheet to keep everything together and organized.
Once you have the total amount of income you earn along with the total amount of costs, you need to do some math. Subtract the expenses from your income to see how much money you have left over at the end of the month. This money should be placed in its own account for emergencies. Having an emergency fund is important for any family, since you never know what life can bring. Ideally, you want enough money saved in your emergency fund to survive up to 6 months.
Cut Costs Where You Can
Now comes the tricky part of cutting costs each month. Oftentimes, families find that their expenses either outweigh their income or come very close to it. One of the easiest ways to cut expenses is by taking a look at your financial accounts to ensure that you are using a financial service without hidden fees to manage your wealth. This way you aren’t losing money each month to things like minimum balance or overdraft costs.
The next best way to cut costs is by taking a deeper dive into your monthly expenses to see if what you are spending money on is really worth it. Many households spend hundreds each month on unused subscriptions services. Simplify and cancel your subscriptions that are not being frequently used or no longer are needed by you.
Plan Ahead
Lastly, another great practice to ensure better money management is to map out your spending. Planning ahead for any big purchase is important. Since we are approaching the holiday season, now is a great time to start budgeting for any gift giving that you may do. For starters, set aside a small amount from each paycheck, this way you can ensure that you have some money to use for gifts, without feeling overwhelmed when December rolls around. Next, plan to purchase items around store sales. Utilizing days like Cyber Monday and Black Friday is a great way to save money that you can then allocate to other costs or even place in your emergency fund.
Money management is something that becomes easier with time and practice. Knowing how to plan ahead with your spending, when to cut costs and always having an idea of your household incomes are all great ways to start building this strategy into your daily life.
Thank you,
Glenda, Charlie and David Cates
