Taming Your Spending Through Budgeting

Expense Analysis: Budgeting and Eliminating Unnecessary Spending – Whether it’s a spontaneous purchase or a recurring bill, all expenses must be paid. Even if you create and stick to a budget, refining your spending habits can be challenging. Do your expenses truly enhance your life? Let’s examine the anatomy of our expenses.

Start by Living Within Your Means

The first step is to assess your income and expenses. Consider all income sources, including earned income, dividends, interest, business profits, and potential retirement income like Social Security or pensions. Once you have a clear picture of your income, create a budget that aligns with your priorities. Commit to sticking to your budget and hold yourself accountable. Categorize your expenses into three buckets:

1. Fixed Essential Expenses

These are essential, non-negotiable expenses with predictable costs. Examples include mortgage or rent, utilities, car payments, cell phone bills, groceries, and loan payments.

2. Variable Expenses

These expenses fluctuate, and their level of importance varies. Examples include transportation costs, clothing, gym memberships, dining out, personal care, home maintenance, and entertainment.

3. Discretionary Expenses

To identify discretionary spending, examine your variable expenses and determine which are truly necessary. Consider reducing or eliminating expenses that don’t significantly contribute to your well-being. For example, cook more meals at home, reduce your number of streaming services, or delay non-essential purchases like upgraded phones or cars. Review all your television subscriptions and see if you can cut one or two or rotate them throughout the year. Review past spending habits to identify other areas where you can cut back.

Financial Health Assessment

Discover the state of your financial health with Savant’s Ideal Futures Financial Health Assessment℠ – a three-minute exercise that provides an objective and wide-ranging audit of your current financial situation, helping prioritize what aspects of your financial situation need attention so you can create a plan of action.

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Reallocate Saved Funds

Once you’ve established a budget, commit to it daily. Many people are surprised at how much they can save by tracking their spending. Use these savings to pay off high-interest debt, build an emergency fund, or invest for retirement.

Budgeting for Financial Freedom

Budgeting is a crucial step toward financial freedom. By analyzing your spending habits and prioritizing your needs, you can make informed financial decisions. If you’re interested in creating a budget or discussing your financial goals, we’re here to help.

This is intended for informational purposes only. You should not assume that any discussion or information contained in this document serves as the receipt of, or as a substitute for, personalized investment advice from Savant. Please consult your investment professional regarding your unique situation.

Jonathon D. Merickel Portfolio Advisor CFP®, MBA

Jonathon has been involved in the financial services industry since 2002. He earned a bachelor of science degree from Syracuse University and an MBA from Le Moyne College.