Kelly Ho, a certified financial planner at DLD Financial Group, says you should start by identifying your fixed costs such as rent, mortgage, utilities or car payments followed by figuring out how much you make. “Sometimes when I ask clients, ‘What is your income?’ Not everyone can give me a straight answer,” she says.
From there, she says, take at look at the rest of your spending and see how it compares with your budget to see where the differences are. If you pay by credit or debit card, your monthly statement will help show where the money is going. “It’s just a matter of really understanding how much money is coming in and how much is going out,” Ho says.
Subscription spending: easy to start, easy to overlook
Subscriptions can be a stealthy way to lose track of costs. The cost of subscriptions for not just shows and music, but other services can pile up over time. With apps offering easy sign-ups and free trial periods, it can add up before you realize, unless you keep careful track of your spending.
“Everything costs money and sometimes in the spur of the moment, we’ll subscribe with the intent of unsubscribing at some point. But again, life gets busy, so therefore we leave it on and we’re wondering why our credit card bill is so high every month,” Ho says.
Ho says finding savings of $10 a month here and there can quickly add up if you are cancelling more than one subscription or service you don’t need or use. “You multiply that by 12 months, multiply that over several years, plus, you know, potential investment growth. That’s a lot money on the table,” she said.
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When real-life spending doesn’t match the budget
Ho says travel is another area where your budget may not match reality.
“Every single individual I’ve spoken to has underestimated the cost of travel,” she says. “I don’t know if many people actually keep track of what they’re spending when they’re there at their destination.” An extra round of drinks, a pricey souvenir or an extra excursion while on vacation can add up to blow past a planned budget. “I encourage people to be more intentional about saving for travel as opposed to simply lumping travel in with everyday costs,” Ho says.
Becky Western-Macfadyen, manager of financial coaching at non-profit credit counselling agency Credit Canada, says when reviewing spending on things like wireless plans that can include all sorts of bells and whistles, it is important to understand what you need. “You want to make sure you’re paying for what you actually will use in your plan,” she said.
Western-Macfadyen also says deleting apps like food delivery services from your phone might make it less convenient, but stopping regular spending on takeout or at least making it a littler harder will add up.
She said the payoff of having a little savings put aside for an emergency can even help you save in the future by avoiding taking on debt. But, she acknowledged that changing spending habits can be hard and sometimes the reality is you can’t find areas to cut.
“If someone looks at their budget and thinks there’s nowhere to cut, that doesn’t mean they’ve failed,” she said. “It means the budget is just telling you the truth. It’s information. And savings comes from understanding your cash flow and sustainable change. So you want to just tell yourself the truth so you can make decisions based on that.”
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