If you followed the tips in my first installment of Personal Finance 101, then you should have a general idea of where your finances currently stand and what your goals are. Now it’s time to get started down the path to achieving {and exceeding!} those goals. To kick things off, I suggest following what I have dubbed the 3 R’s – Restart, Reevaluate, and Renegotiate! These three steps worked well for us – so I’m hoping one or two {or maybe all three!} will benefit you, too!
Restart
In my first post, I suggested looking back over the past few months and recording how you spent your money. If you’re like me, taking a detailed look at the actual numbers might surprise you. When we first analyzed our spending habits, we immediately noticed a few areas that needed improvement. {For example, we were eating out far too much!}
Or, you might see some past mistakes glaring back at you. Maybe you went a little crazy swiping your credit card and spending money you didn’t have. Or made a large impulse purchase that you’re still paying off. Perhaps you have student loans and have only been paying the minimum amount due when you could have been paying more.
While it’s important to recognize these mistakes and to take responsibility for them, it’s also imperative that you look at this exercise like you’re pressing the “restart” button. The past is the past – you can’t undo poor financial decisions that you’ve made. And trust me, we’ve all made them. Rather than beating yourself up over past mistakes, be proud that you’re on the road to fixing them. You’re taking the next logical step toward correcting them by embarking on this financial journey. And that’s something to celebrate! So press the restart button, know that you’re learning from your mistakes, and charge forward!
Reevaluate
As you identify the areas that need improvement and recognize the financial impact of any past mistakes you might have made, now is the time to reevaluate your spending habits. Like I mentioned above, we immediately noticed that we were spending way too much money eating at restaurants. So one of the first changes we made was to limit our eating out. We agreed that going out to eat one time per week was reasonable for our lifestyle. And now, we usually eat out on Friday nights and kick off our weekend with “date night.” We cook at home the rest of the week. If my husband wants to grab lunch with his coworkers or I plan a girls’ night at the local Mexican restaurant, that comes out of our individual “fun money.”
This segues into another problem area for lots of people – your coffee habits! It’s no surprise to anyone that the grande caramel latte at your local Starbucks is way more expensive than brewing the same drink from the comfort of your own home. Plus, the grocery store is full of fun creamers and flavors to make your copycat recipe taste like the real thing! But if you’re serious about your finances, consider taking it a step further. Those individual coffee pods {whichever brand you prefer} are still eating into your grocery budget. You think you’re saving money by brewing at home {and you are!}, but you can do so much better by purchasing coffee in bulk and brewing with reusable adapters. Personally, we purchase Folgers coffee in bulk and spend a whopping $3.59/month on the actual coffee grounds. Coffee pods can cost up to $1/cup – so the numbers speak for themselves!
Another area I suggest reevaluating is your technology budget. For example, if you’re paying for Hulu + Netflix, and a huge cable or satellite package plus DVR capabilities – is it really worth it? Can you justify those expenses? If you MUST have cable, consider nixing your DVR service if you already pay for a streaming platform. These expenses add up quickly, so now is the perfect time to reevaluate what you truly use and what you can cut.
Renegotiate
Sometimes as consumers we think we’re stuck with a certain plan or a set price. But it’s important to remember that we have the bargaining power! Take a look at your bills and consider renegotiating with your vendors. In January, we were surprised when two of our bills increased – our TV/internet provider by $10/month and our home security system by another $5. I started by calling Xfinity and renegotiating. I was able to switch to a better plan {more channels and comparable internet speed} AND reduce our bill by $36 per month! I was thrilled! Next, I live chatted with ADT and politely explained that my bill increased without any additional services being offered. The representative did a quick account review and offered me not $5 but $10 off our bill! So in less than 30 minutes I reduced our monthly bills by $46!
In addition to renegotiating your bills and plans, consider available discounts as well. Many companies offer reduced rates for first responders, military, teachers, etc. Check with your vendors to see what’s available to you!
By tackling the three R’s, you’re taking some solid steps toward improving your finances! After reducing and renegotiating some of your expenses, you should have a better idea of what your monthly expenditures will look like. In my next post, I’ll be sharing a sample budget template that you can use to track your income and spending!