There’s too much month at the end of the money.
At least that’s what they say in country music.
This can quickly become true for many of us if we don’t stay on top of our regular and not-so-regular monthly expenses.
Here’s a few of my suggestions for conquering those monthly expenses before they get to out of hand and send you into debt.
Know What You Have to Pay Each Month
There’s not much more clarifying from a financial standpoint than listing out all of your known, fixed expenses. It’s a great exercise. If you don’t regularly budget, then doing this three or four times a year is almost critical.
It’s easy. Just visit your checking account (and/or credit card account if you pay your bills from there) and find your routine, fixed monthly expenses. To give you an idea of what you should be looking for, I’ve listed our regular, fixed monthly expenses below:
- $1,017 – Mortgage
- 182 – Cell Phone Service
- 79 – Internet Service
- 50 – 529 College Savings Plan Contributions
- 43 – Term Life Insurance
- 43 – Gym and Health Service
Other common expenses you will see here are auto loan and health insurance. We own our cars outright and pay health insurance from by business account.
You’ll notice that these expenses are all associated with a contract or auto draft, and they’re going to be fixed (or within a dollar or two) each month.
This is the time when you should stop and ask yourself if those expenses make sense. Are you using them all? Do you need to add something? Could you eliminate something? Could you reduce your monthly payment somehow?
Then there are the dreaded regular, yet variable, monthly expenses. You still have to pay these each month, but your usage will affect how much you’ll actually pay. Here are our estimated regular and variable monthly expenses:
- 250 – Electric
- 55 – Water/Trash
- 40 – Gas (Utility)
The purpose of getting to this point is to be able to know, down to the exact number, what expenses you are obligated to pay each month based on agreements in place. This gives you a great starting point to evaluate the rest of your spending.
Consider Moving to Annual Payments
To take a lot of the stress and worry away from making all of your monthly payments, consider moving to annual or semi-annual payments. We’ve done this with tithing, auto insurance, property taxes, home owner’s insurance, home owner’s association dues, and retirement savings contributions (quarterly).
Of course, along with the convenience of only having to worry about these expenses once a year comes the responsibility of making sure you have the cash on hand to pay for them. We help to mitigate the risk of not having these funds on hand by setting up multiple automatic savings plans in our Electric Orange account.
Be Conscious of Your Big, Out-Of-Control Categories
Beyond those fixed and variable regular monthly expenses listed above, you’ve got your highly variable expenses: food, travel and fuel, dining out, gifts, personal care, clothes, entertainment, pets, household, etc.
Individually, many of these expenses usually don’t amount to much from one month to the next. But you know your weak spots. For us, it’s dining out. Once you’ve identified your weak spot, apply a little budgeting. Set a goal for this category next month.
Take it a step further and withdraw cash from your account at the beginning of the month to spend only on this category. This hyper-focused budget will allow you to place your cares and concerns where it counts: the spending categories that get out-of-control.
This doesn’t mean I don’t like full-on budgeting though. If you decide you have several of these out-of-control categories then I would recommend a zero-based budget approach like Dave Ramsey touts. YouNeedaBudget.com budgeting software can help you implement this fairly easily.
Have Confidence to Spend the Rest
This may sound odd, but if you’ve allocated your money correctly each month (before the end of the month), then any money left in your checking account at the end of the month is truly yours to spend freely. Allocating your money correctly means you’ve taken into account all saving, giving, and spending goals for the month. If you’ve done that then treat yourself or someone else.
Can You Truly Conquer Monthly Expenses for Good?
The truth is, unless you decide to go completely off the grid, you will always have monthly expenses. Even people with paid off homes and no other debt have living expenses to deal with (e.g. taxes, utilities, lifestyle inflation, etc.)
So, avoid thinking that there is an end in mind here. You will always have to be diligent in keeping monthly expenses in check. To truly conquer those monthly expenses, your goal should be to bring more consciousness into your spending decisions and to periodically re-evaluate your financial situation.
What approach do you take for staying on top of your monthly expenses? Are you a full-on budgeter? Would you confess to being oblivious to your spending because your spouse watches it all?