This post is about as close as I’ll ever get to advocating that you start a monthly budget, but it is something that I’ve done over the past couple of months that has really helped me reduce the amount of money that I’ve spent on useless “want” items.
If you’re anything like me, you probably pay most of your bills online each month, not only to save the 41 cents on a stamp but because it’s pretty quick and easy.
One of the bills that I pay online each month is my credit card bill; I think subconsciously I liked doing this because it allowed me the opportunity to not really examine what I was spending my money on each month. As long as my monthly bill remained pretty consistent each month, I never really felt the need to run down the itemized list and examine my purchases.
While it was kind of nice to just set it and forget it, I slowly but surely started to realize that I was probably wasting a lot of money each month buying items that I didn’t really need.
So, I took the most recent monthly statement, opened it up and examined what exactly I had spent my money on during the past month. Because I charge everything (and pay it off each month) I figured this would be a pretty simple way to take a good look at how I was getting rid of my hard-earned money.
In order to determine where my money was going, I wrote down six categories – food/health, clothes, home, entertainment, car, and miscellaneous – and placed each item in my credit card statement into one of the categories. From there, I broke each category into two sub-categories – needs and wants.
Items like groceries, gasoline, utilities, etc., fell into the needs sub-category and items like DVDs, golf balls, video games fell into the wants sub-category.
In looking at the balance of where my purchases were going, most of them fell into the needs sub-category, however, I noticed that there were a lot of unnecessary purchases in the wants sub-category. I figured that if I could eliminate 50% of those purchases I would be able to save several thousand dollars each year.
Don’t get me wrong, I’m not say that you shouldn’t have any fun and should never purchase something that isn’t a need; there’s nothing wrong with splurging on yourself from time to time. That being said, if you start breaking down your credit card bill each month and notice more wants than needs (especially if you don’t pay off the bill each month) it might be time to reassess your purchasing decisions.