I am sure most of you are familiar with the term “Spring Cleaning” as it relates to your home, the thorough cleaning that takes place, and the shirt, pants, or shoes that you find and donate or give to a friend or family member after you acknowledge the item has not been used in a long time and probably does not even fit you or your style anymore. Today I’m suggesting that you perform a spring cleaning of your finances as part of the new year. You’ll be surprised what you may find that allows you to save some on your expenses going forward. I underwent a review of my finances this month and I will show you how I saved some money.
Take Four Easy Steps to Cleanse your Finances
Step 1: Print or download your end-of-year expense reports
The first step is logging on to your Bank and Credit Card Company websites and downloading your end-of-year expense reports. Most companies make it quite easy to understand your annual expenses – they summarize your spending by category and allow you to review the details behind each of these categories. Even if you don’t find any unnecessary spending (I doubt that will be the case), it is a good exercise to see what you are spending your money on.
Step 2: Identify and eliminate overlooked reoccurring expenses
Like the designer shirt you bought five years ago that you don’t quite understand why you bought it and you never wear it, you may find some subscriber fees or other reoccurring monthly charges that you forgot were there because they are not too much money at one time. Look to see what expenses are repeating and reflect on whether they actually are providing any benefit to you and your family.
I did this and found some items that I could cancel to quickly to save me almost $2,500 per year:
- We were paying a monthly kids club fee so our kids could be dropped off at the local gym while we exercised. It was $24 per month or a $288 per year. We haven’t used it in over a year now that the kids are older and have their own after-school and evening activities. We cut this cost immediately.
- We have Netflix but we realized we were still paying for the ability to request physical DVDs. We don’t have a DVD player in the house so needless to say we have been paying for something we don’t need for at least the last three years. We saved a little over $60 per year by cancelling this service.
- I subscribed to trial service for one of those sports apps because I wanted to see a sporting even with the good intention of cancelling the subscription after a few months. I forget to cancel it last year and by cancelling it in January I am saving about $100 during the upcoming year.
- My wife and I joined a meal-kit company that delivers two meals per week to our home. We have over 100 recipes from this service and agreed we could save a lot of money by just buying the ingredients ourselves. The service was costing us $3,800 per year and we will be able to cut our costs by at least half by just buying the ingredients from the market.
I’m betting you can find some reoccurring expenses that you don’t need for 2020.
Step 3: Trim down those unnecessary discretionary expenses
Spring cleaning your closet can show the purchases you made in the past that you did not need to make in the first place. Do any of us really need a twentieth pair of shoes, four pairs of sunglasses, or fifty t-shirts? Check out where the majority of your money is going, identify which type of expenses consist of truly discretionary spending, and then dig into the details to see where you might be able to make some easy cuts. I found that some of the things I do have resulted in some serious over-spending and by making some changes I can save the family some serious cash:
- I tend to go to Starbucks before taking my kids to their practices. Considering I am coming from the house where there is plenty to drink and eat, there is no need to be that $4.00 coffee before heading to my kids practices. I’ll save several hundred dollars per year by stopping this behavior.
- I compile other unnecessary costs while taking my kids to their practices by leaving late and trying to get back some time by jumping on the toll road that costs me about $8.00 every time I use it. Again, this cost me just over $300 dollars last year and by making sure I leave on time (or accept the consequences of my kid showing up five minutes late) I will save real money.
- Last but not least, I found that my gas purchases are all too often accompanied by a purchase at the convenience store. It was amazing how many times I saw on my credit card statement a $40 gas purchase accompanied by a $6 purchase for some kind of snack. I’ll save almost $400 per year by breaking this bad habit.
- My kids are competitive junior athletes and we are proud of their accomplishments. My son has played in a junior world championship event several times and he has done very well. Unfortunately, this event is on the other side of the country and it costs several thousand dollars in air travel, hotel, rental car, and entry fees. For the next few years we are going to limit tournaments our kids compete in to local and state tournaments and probably save several thousand dollars per year.
If you are running lean while on your journey to achieving financial independence then congratulations but if you are like me bad spending habits can creep up on you and completing this step can shine some new light on reducing unnecessary expenses.
Step 4: Verify Insurance and Other Monthly Costs are Competitively Priced
The next step you should take is making sure things like insurance, phone and cable bills remain competitively priced. A few hours of comparing services online or talking with your service provider on the phone can save you several hundred dollars per year.
This year, my wife and I noticed that the promotion with our cable company had recently expired and our bill was going to go up by close to $50 per month. We compared rates and negotiated with our current provider to make sure we kept our bill from going up in 2020.
Automate your Spring Cleaning
The last step I am going to take this year is to set-up a web-based personal financial management tool in 2020 to better aggregate and track my investments and expenses in real-time. I’ll be trying out a few options this year and I’ll let you know which tool I recommend in a later post.