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This is a guest post from Jessica Ward.
It happens to many of us: we design a lean, mean budget, but over time, like a worn-out rubber band, it begins to lose its pull. Sure, it’s still there and still performing its duty, but it isn’t the well-tuned machine it used to be. You might have experienced some “lifestyle creep” — little things, which add up over time.
Is your budget doing its job? When was the last time it got a tune-up? Here are a few quick checkups to make sure your budget is running at peak efficiency.
- Pull out your budget from last year, and, if you can, 2-3 years ago. If you don’t keep your budgets, check your bank statements. How is your spending compared to last year? One of my favorite books is Jim Collins’ “Good to Great” which explains that “success is a direct result of disciplined people, doing disciplined things, in disciplined ways.” How disciplined is your spending, especially in comparison to past results?
- Review your most recent grocery receipts. Highlight the four or five most expensive things. Would you have purchased those items a year ago? What can you do to reduce or eliminate those? I discovered that a consistently large expense in my budget was laundry detergent, so I started making my own. It costs about $2.70 per year, versus my earlier $17 per month. Saving money on groceries can go a long way towards taming your budget.
- Conduct a regular budget “performance review.” Managers review their employees. If your budget is not working for you, you need to know early on so you can spot and correct problem areas. At least twice a month, if not weekly, revisit your goals versus actual spending and see where you’re at. A monthly post-mortem on the budget is virtually useless, because you can’t fix the prior month — you can only budget smarter for the following month. Attacking your budget from both sides will be far more effective.
- Have you added cable TV or other extraneous services back into your budget? Do you really need it? I cut my cable one summer in a fit of budgetary ambition. A few months later, ice hockey season started, and I really missed the games, so I succumbed and added the cable back in. After a couple of these cycles, I learned that some cable companies offer 3 or 6 month promotions without a penalty for canceling. Now, I add cable just for the winter at a short-term promotional rate. If you’ve elected to keep cable year-round, try calling and asking them to adjust your rates. Our cable/phone/internet services are “bundled” so we periodically call and ask to be “rebundled” (same services, new price structure). They can almost always drop our price — if they can’t, they can usually tell us when the next promotional rates begin, so we can call back at that time.
- This is the season for outrageous energy bills. Call your energy company and find out the best ways to reduce your energy bills. Perhaps you could run the laundry and dishwasher at night during off-peak hours. The utility company may even provide free energy consultations. My water company noticed my high water usage and offered a consultation — they gave us free replacement showerheads which cut down on our water and electricity use (for hot water).
- Check for “zombie” charges. Recurring charges on your bank account and credit cards can slip by us unnoticed. Double check for magazine subscriptions, newspapers, gym memberships, and other items that might be under the radar.
- Ditch the storage unit. If you’re paying for offsite storage, you may think you’re saving money “just in case” you need that stuff again. But in reality, you’re buying it all again every month. Remember, the keystone to frugality is efficiency. Hold a garage sale, and stash that money in your emergency fund, just in case you do need some of that stuff again.
- Call your home and auto insurance company and ask for a lower rate. If you can’t get one, call a qualified insurance broker and have them shop your policy around.
- Eliminate “miscellaneous” from your budget. Be ruthless with unallocated spending. If it isn’t important enough to budget for, should you really be spending it?
- Think before you renew! Many magazines and newspapers automatically send their renewal notices at year end. Let’s face it, we’re just trained to renew things at the end of the year. But the fact of the matter is, your renewal may not be up for many more months. I once canceled a magazine subscription and continued to get the magazine for a year. I called and asked why, and they explained that I was renewed for another two years — I’d just paid each time they billed me. Thankfully, they gave me a refund for the overpayment.
So those are my ten tips for giving your budget a tune-up. What tips and tricks do you use to keep your budget in line?