Where does it all go? Creating a smart budget starts with identifying your fixed and variable expenses. Fixed expenses are anything that’s the same week after week or month after month. They don’t vary; they’re fixed. Variable expenses or spending, well, that’s everything else. Taking stock of all of your expenditures will help you discover where you can cut back and save those precious dollars. Here are few helpful tips for identifying your fixed and variable expenses and ways you can save.
♦ Fixed expenses
Figuring out how much you make is easy, but figuring out what you spend takes a little more effort. Your fixed expenses should be fairly easy to track because you pay them regularly and the amount doesn’t vary much. Knowing your fixed expenses for the year can help you avoid unpleasant surprises when a big bill comes due.
Rent or Mortgage: You know this amount by heart. It’s seared into your brain and your checkbook. Is it time to downsize?
Loan Installments. Whether it’s your car payment or your student loan payment, there’s a set amount that goes out the door each month to pay them off. Call your lender and see if you can lower your monthly payment without increasing your interest.
Insurance. The bills come like clockwork-life, health, home and auto. Talk to your agent. Don’t lose necessary coverages, but trim where you can.
Utility Bills. Your gas, water, sewage, trash, electricity, Internet, TV and phone bills never take a month off. Scale back wherever possible. Look for little ways to save like turning off lights and not leaving the water running when you brush your teeth. The little things add up.
Credit Card Bills. Even the minimum can take a real bite out of you. Try to negotiate lower APRs. And, read those notices. The fine print is important. If they raise your rate, you can opt out of the higher rate by closing the account. You have to stop using the card, but this allows you to pay off the balance at the original rate and schedule.
Don’t forget to factor in the annual bills like car registration and property taxes.
♦ Variable expenses
This is a bit trickier. Variable expenses include all of your non-fixed expenses like groceries and your discretionary spending like movie tickets. Because they’re never the same amount and they’re sometimes spontaneous, tracking your spending can take a little doing. But, if you’re serious about controlling your money, this is where the rubber hits the road.
Groceries and Food. We’ve all got to eat, but are you spending wisely at the market?
Medical Bills. Ironically, these can be real killers. Negotiate with your doctor to find a payment plan you can live with.
Entertainment. How much do you spend on video games, movies and amusement parks? It’s easy to spend twenty dollars here and twenty dollars there. Keep your receipts or track you credit card and bank statements to see how much you spend each month.
Trips. If you took a family vacation, get your CSI on and investigate just how much that trip really cost. Don’t forget to include gas or plane fare, food, lodging and all those incidentals like souvenirs.
Gifts. Are you generous to a fault? Look at how much you spent on gifts this past year. Can you spend less and be more creative?
Get a budget book and track your expenses daily. Knowledge is power!