How to Evaluate your Spending During Quarantine
As many of us are finding out, quarantine has led to a number of interesting discoveries about humanity and about ourselves. I’ve improved my banana bread recipe, binged a few new Netflix series, and now know what time each neighbor walks their dog.
I have also had time to sit down and look closely at my credit card bills, and the discoveries have been surprising and enlightening. I am spending much less than I ever did before! That makes me wonder: Before the quarantine, did I really spend that much money eating out every week? How much did those nights out with friends really cost? Did I really need all those shoes?!
Taking the time to look at our budgets can have huge impacts on our future and can make us better consumers and better savers in the long run.
As we start to venture back out into the world, will the spending resume or can we learn from our quarantine money experience? Here are some tips to make the reduction in spending last.
Put your spending into 3 “buckets”:
1. Non-discretionary spending for basic needs.
These are things you have to spend money on. Your mortgage/rent, car expenses, insurance, medical care, basic groceries… Estimate these so you will have a better idea of what else you have room for in your budget.
2. Discretionary spending for which you have a contract.
Here we are talking about streaming services, cable, cell phone bills, Amazon prime, etc. These could be wants or needs, but what they have in common is that you have committed to them for a period of time and there may be a cost to canceling your contract.
3. Discretionary spending that varies each month with no contract.
This is the fun stuff. Dining out, entertainment, clothing, Amazon shopping, that cute new armchair to help you get through quarantine… Whatever it is, and whether it is an absolute necessity is up to you, but looking at your budget this way will help you know if you can afford it!
Once you have all of your regular spending listed out, it is time to make some decisions. If you feel like your life has been fine without some of the things that you spent money on before the quarantine, can you live without them after? Can you live without take-out meals? Do you really need that wine store membership? If you are anything like me, you might keep the wine membership and that is totally fine!
The idea is to streamline, and to get rid of anything you find you don’t really need in your life. And if you have any amount of consumer debt, now is the time to make significant progress on paying it off.
Why not try a new budget for 6 months?
● See if your new lifestyle works for you, and find out what really matters to you. You might find some things you really do need in your life, and you might find you are ok without others. But the act of planning and evaluating your decisions not only teaches discipline but can help get you on track for the long term!
● The good news is that you only have to track that last bucket – the discretionary spending. That’s where your daily decisions make a difference.
Expense Tracking Tools
Afraid of the work involved in tracking expenses? There are some easy to use apps and tools out there to help you. Here are a few we recommend, to help make your budgeting easier and your spending more intentional.
Online Banking:
Most banks provide an in-house app for watching your budget. For example, Wells Fargo has a tool called “Budget Watch” which provides nice graphing to help visualize what your spending actually looks like. Review your bank’s website and reach out to the bank if you need help getting started.
Mint:
Mint is one of the more popular budgeting apps out there, and for good reason. Over the first few months of use, it starts tracking every payment you make and categorizes it for you. Once it learns your spending habits, it helps keep you on track by letting you know if you are over or under budget and how best to use your funds. Additionally, it provides a weekly credit score check, free of cost.
Overall it helps provide a nice picture of your finances. Easy to use, we recommend this app for anyone trying to budget and save.
YNAB - You Need A Budget:
YNAB is taking a forward-thinking approach to budgeting. Rather than simply relying on the guilt associated with looking at a graph of your spending, they help you actually allocate your resources towards your goals by using a zero-based budgeting system which forces you to spend every dollar on the platform until you hit $0. This means you know exactly how much of your discretionary funds you actually have to spend. They also have flexible features which allows you to move money over to different areas of spending based on changes in spending priorities.
This is an easy, more interactive approach to budgeting. The only downside is that while it has a free trial, you will ultimately have to pay for an account.
Fearless Finance:
Fearless Finance takes a different approach to budgeting. Rather than linking up your banking accounts, you simply fill in information once a year and get recommendations right away. Ultimately, you monitor two specific expenses, and use these to help build discretionary spending.
This is a simple platform, and you don’t have to follow up as regularly. With a one-time fixed fee, there is no regular membership fee payment.
Here at Everyday Money Management we took the month of June in our Whole Life List program to look at our clients’ budgets. Helping clients see and understand their budgets is key to helping them manage savings, spending and giving.
As always, give us a call, we would love to help YOU on your way to a healthy and easy budget!