Planning Briefs
5 Tasty Tips For A Spending Diet
Published Monday, March 24, 2014 at: 7:00 AM EDT
Whether it's the holidays, vacation season, or any other time of the year when you take your spending up a notch, the aftermath can be sobering. Credit card bills and bank statements arrive. Suddenly, you feel bloated—and resolve to cut some of the fat from your budget. These five steps could help you go on a spending diet to improve your financial health:
1. Count the "calories." Where is the extra weight really coming from? Before you can trim expenses, you need to know what they are. But documenting every single item can be tedious and nerve-wracking. For many people, a better option is to make a list, based on your statements, that provides a ballpark estimate. Then you can determine what percentage of income goes toward necessities, such as housing and food costs, and what is discretionary. Aim to save at least 20% by cutting back on the luxuries.
2. Focus on the "meat and potatoes." Don't ignore those major monthly costs—your mortgage, car loans, and insurance premiums. Look for ways you can spend less on these "fixed" items. For instance, it might make sense to refinance the mortgage and shop for less expensive auto insurance. Similarly, you might be able to reduce commuting costs by carpooling or switching to mass transportation.
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