Confession: in 2016, I paid bills late about 50% of the time. I’d always found the responsibility of managing finances tedious and at times overwhelming. For years, I kept a monthly budget on an excel spreadsheet, with the intention of updating it once a week. I even had the bill due dates make on the sheet for reminder. But what usually happened is that I waited until the last possible minute to pay bills and update the budget. Often times after I’d gotten a late fee and sometimes after I’d gotten my “last notice”. I’m embarrassed to admit but it’s true. Can you relate?
The thing is, I knew my system of managing our finances wasn’t working. But I was too stubborn and not motivated enough to abandon my old ways. But that all changed last month when my husband and I decided we wanted to start saving for our dream home in 2017. And it was all the motivation I needed to hit the reset button and get serious about our finances.
Below are the three action steps I took this month to kick our financial makeover into gear. It’s only been three weeks since I started the challenge but but I’m already seeing results.
1. I GOT SERIOUS ABOUT TRACKING OUR SPENDING
There’s no way to be in control of your finances unless you know where your hard-earned money is going. To track your spending, you need a working budget. I had a budget but I rarely looked at it. And when I finally did, I’d already gone over budget, ending with spending deficit.
So the first thing I did on January 1st was sign up with Mint, the free money management tool that makes it easy to effortlessly stay on top of your money. Mint’s bill tracking and payment tools not only helps me avoid late fees but also enables me to pay my bills in one place. Now, instead of logging into different websites to pay bills (electricity, phone, rent, etc), Mint sends me email reminder when my bills are due and I quickly login into my Mint account to make multiple payments. Three weeks into January, I’m current on my bills and I’ve incurred zero late fees.
Another favorite Mint feature is how easy it makes it to create and maintain a budget. First, I sinked my Mint account to my bank, credit cards, and various bill websites. Then I created a budget for each spending category. Now Mint does all the work – it tracks my spending by category, shows me where I’m going over budget and where I’m saving money. I never thought I’d say this, but I’ve actually started enjoying managing a budget 🙂
2) I COMMITTED TO CUTTING SPENDING BY 20%
There are really only two ways to have more money – to earn more of it or spend less of it. Earning more money, whether it’s asking for promotion, growing your business or starting a side gig takes time and patience. But how much you spend is something you’ve control over immediately. So I set a challenge to cut our expenses by 20% and put those savings toward our “Dream Home Fund”
First, I divided our expenses into fixed costs and variable costs. Obviously, fixed costs are expenses that I can’t avoid, such as rent, utility bills, and loan payments. But variable costs, like groceries, eating out and personal care are expenses that are within my control. So I took on the challenge of reducing our variable costs by 20%. Before January 2017, my total variable costs was $2500, so the goal now is to bring it down to $2,000 a month.
The variable expenses I found easiest to trim were eating out, groceries and nanny. Did you know that eating out is the biggest expense for Americans besides rent/mortgage and car note? If you eat out more than twice a week, make it a priority this year to cut back and watch your money magically grow. Seriously!
We decided to limit eating out to once a week and I stepped up my meal planning for the rest the week. Grocery wise, few changes I made include doing a Costco run once a month for bulk items, eating more vegetarian dishes throughout the week and opting out of bottled water in favor of filtered water. And in terms of nanny expenses, I now only use our nanny twice a week instead of three. And on date nights, my in-laws have agreed to watch our daughter, which is huge help. With all these strategies, I’m well positioned to cut our variable expenses by 20%. And once I’ve achieved that, my goal is to increase that challenge to 25%.
3) I Automated Our Savings
In my experience, unless savings are scheduled automatically, they don’t happen. So decided to take the principle of “paying yourself first” seriously.
On my Mint account, I created a sayings goal of $6,000 by the end of the year. That’s the $500 I’m saving from reducing our variable expenses each month. This is of course in addition to the 20% down payment we’re saving for our future home.
Each month, $500 is automatically transferred from my checking to my savings account. And since my bank account is tied to my Mint account, each time I login to pay bills or check my budget, I can see how much my savings are growing. Because saving $500 is a huge priority right now, I don’t wait until I’ve money left over from the budget to transfer funds into sayings. I do it first each month then I work with the remaining funds to meet my budget. Trust me, it sounds like a big sacrifice but watching your savings grow is a lot of fun!
What is one finance related goal for 2017? Please leave me a comment below, I would love to hear from you.
Photos by: Laydee Kaye Photography
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