If you find yourself with a meager bank account the few days before payday, an expense audit might be your savior. For the budget challenged, doing an expense audit is as simple as pulling out your debit card statement and reviewing your purchases: the essential and not so essential.
Let's take a look at a few common expenses anyone can slash from their monthly budget to save money and keep their bank account padded until payday.
Step 1: Identify all monthly expenses.
What are your monthly recurring expenses? Create two columns: essentials and non-essentials.
List your essentials along with the amount you expect to pay for them. After you've listed the essential recurring expenses, review your statement for random, not-so-essential purchases that somehow show up on your purchase history frequently. List these expenses on the non-essentials column. Take a hard look at both columns, and then decide what you can do without, even if for a short time, until you are able to maintain a solid spending plan throughout the month.
Step 2: Decide what to eliminate.
As yourself what you should eliminate from your monthly spending plan if you find yourself unable to make it to payday. Take a look at the following line items and consider their importance in your financial life.
- Landlines/cellphones. With the Internet, landlines have become pretty much obsolete. Still, most people tend to keep landlines to power their home security systems or just for the feeling of security in the event their cellphones lose service. Depending on your lifestyle, you may be able to eliminate both completely. However, most people choose one or the other. Most of the major cellphone carriers have low-cost plans with no long-term contract commitments. For example, Virgin Mobile offers plans that start at $35 per month compared to the standard unlimited plan with T-Mobile (TMUS) for $120 per month. See the savings? That's almost $100 per month saved already!
- Cable. Again, the Internet makes paying for cable unnecessary. If you only watch certain shows, then paying for a fully loaded cable package might not be the best deal for your wallet. This is because services such as Hulu, YouTube, Netflix (NFLX), Google TV (GOOG) and Roku give you exactly what you need for a drastically reduced rate or for free. Remember, this depends on your television habits. If you like watching the Sunday afternoon football games, evening news, morning political shows or need to keep up with breaking news as it hits the wire, then you may need a fully loaded cable package. However, you might want to consider how important it is to keep up with the latter in the interest of balancing your monthly budget.
- Grocery bill. If you shop at Whole Foods Market then start there. Specialty grocery stores tend to be more expensive and less forgiving in the area of trying to save you money. For example, if you spend $150 at Whole Foods (WFM), your bill at the local discount supermarket might be about $80 for the same type of groceries. That's a tremendous savings! Now if you already shop at the local supermarket and find yourself going overboard, then consider your food shopping habits. Are you making multiple trips to the supermarket? Are you eating steak and shrimp when you really only have a ramen noodles grocery budget? Consider limiting yourself to one trip to the grocery store per week and reducing the amount of meat your eat since meat increases your grocery bill.
- Eating out/happy hour. This is self explanatory. Dining out and attending happy hours is unnecessary, especially when you're out of money right before payday. You may find yourself wanting to "keep up appearances" while struggling financially, but here's my take on that: stop it. Your wallet will love you for it, and you actually cut the shameful cycle of feeling broke at the end of the month. Once you start to see the savings then you'll feel better and reduce the need to hang out to keep up with everyone else.
These are just a few expenses you can cut out to make a difference in the few days before payday. As you review your essentials and non-essentials list, ask yourself: Do I need to spend money on ____________? If it isn't crucial to your lifestyle, then consider cutting it altogether.
Ginger Dean is a licensed psychotherapist and founder of the personal finance website Girls Just Wanna Have Funds.