I already track my expenses. Now what?
A quote regularly attributed to the so-called father of modern management Peter Drucker advises (in varying terms):
"You can’t manage what you don’t measure."
This is the philosophy behind quite many quantified self trends, like counting calories or steps, tracking your moods, or monitoring your sleep. You might even have a handy app like Fortune City for tracking where your money goes. What can you do with all that data?
First things first: Re-examine your fixed costs
Some expenses like your rent remain relatively stable from month to month. That makes them easy to budget for, but also easy to overlook as possible ways to cut costs.
Perhaps inertia has kept you in the same apartment year after year, while you’ve gone from working in an office to working from home to working in an entirely different office at a new job. Does the place you’re currently renting still fit your needs and budget in terms of size, location, and heating and cooling costs? If you do the math on the rent, utilities, and your work commute, you find it worth the moving costs to relocate!
Look for the silly expenses
Imagine you have a wise friend reviewing your expenses, and they keep spotting things you just can’t explain.
Friend: Why did your water bill shoot up over the past 3 months? You: Yeah, there’s a leaky faucet I keep meaning to get fixed.
Friend: You’re paying for 6 different language-learning apps. You must really be good at Spanish now. You: Ah… Oui?
This isn’t to say you can’t keep expenses for things you’re actually enjoying. Just don’t let money drain from your accounts for no good reason.
Be honest about must-have vs. nice-to-have
This time, imagine your wise friend wiping your entire home and all your devices clean, just like a factory reset on your smartphone. Now that the financial clutter is cleared, what are the top things you must add back to your life? What could you be just as happy without? A couple of tips here:
Reassess your entertainment needs. This category is notoriously expensive because it’s not as easy to see your digital clutter as it is to see the physical clutter in your house. Do you really need to subscribe to multiple streaming services all year round? Could you perhaps choose one service per quarter and binge the latest releases before unsubscribing and binge-watching on another paid service?
It’s ok to make tradeoffs. Look, if it’s important to you to have eco-friendly laundry detergent that’s a little more costly than regular brands, that’s great! But perhaps to offset the expense, you can reach for the store brands of your kitchen staples instead of always going for the big names.