By this point in time, she had figured out her debts and recorded her expenses for a month. As I recommended, she created categories for herself and categorized every expenditure. Luckily for her, she’s a lot like me and does most of her spending with credit and debit cards, so she she had an easier time figuring out what she spent and where she spent it.
I had a feeling that she had already done the third step when I talked to her. I told her that in my mind, the third step was looking at those already categorized expenses and figuring out where she was overspending and where she could cut back.
I was right. This was something that she had immediately considered after seeing all of her expenditures categorized in that manner. She quickly realized that she was spending entirely too much money at bars and restaurants, and she felt that she was spending too much at the grocery store as well. I laughed and told her that those were the same things that I had noticed when I started categorizing my expenditures.
My suggestion, therefore, was for her to attempt to cut back in those areas. She could start her saving plan by making small changes, rather than trying to cut back all of her spending. I suggested that she do simple things, like bring her lunch to work, but I also suggested that she make a point of not opening a tab at the bar. It’s all too easy to find that you’ve spent $50 on expensive drinks when you just have the bartender charging things to your tab.
Additionally, I told her that one thing I did to reduce my grocery budget was to create a list and stick to it as closely as possible, allowing myself one “extra” item a trip. I also suggested adding up her groceries in her head as she placed them in her cart. It makes it easier to stick to a budget. I even suggested she bring a small calculator to the grocery store if that made things easier. No one would look at her funny – I’ve noticed people with price books and calculators at the grocery store on more than one occasion.
She agreed that these were things she could try, but she was eager for other information. So I suggested she gather her bills – her cable bill, her cell phone bill, etc., and see if there were any fees or services that could be eliminated. Even if you drop a $5 service from your cell plan each month, that’s a savings of $60 a year for a very easy step!
Megan is a 30-something government employee in the Washington, DC area. She got interested in Personal Finance when she got out of college and realized that her paycheck wasn’t going to go as far as she had hoped. Since starting this blog, she has managed to buy a house and make a solid start on her retirement goals, and hopes to help others do the same. Here is her story:
In 2007, I was a gainfully employed 20-something with no debt but not a lot of knowledge about personal finance. It was a co-worker’s comment about Roth IRAs that sent me to the internet, searching for information. It was then that I realized that I really didn’t know a whole lot about personal finance and that my current financial situation was due a lot to inherent frugal tendencies, generous family members, a fear of debt, and good luck. While that was working for me, clearly I needed a better plan.
While I had no debt, I was also pretty much living paycheck to paycheck and not worrying about going over budget (I say this as if I had a real budget) because I had an emergency fund set aside to cover any overages.
Except that’s not what an emergency fund is for.
So I did a lot of research, read a lot of blogs, and decided that I needed a plan. I needed to budget. I needed to know what I was spending my money on. I needed to prepare for the future.
I decided to create a blog not only to make myself accountable to others but also to share the knowledge that I gained along the way. I’ve learned so much from my fellow bloggers, and I hope that my readers can find something useful in what I have to share as well.