Before developing a budget, you can declutter your finances by making sure you’re not paying for things you don’t need or want. You can also consolidate your accounts and declutter the ones you do keep, which can help you avoid overspending. Learn more strategies for streamlining your finances to help you develop an effective budget, have greater control over your finances, and save money.
Review Your Expenses and Close Accounts
One of the first steps in simplifying your budget is reviewing your bank statements and identifying all your expenses. Categorize them into “unnecessary” expenses (like unused subscriptions) and “necessary” expenses (like utilities) so you can make decisions about where to cut back. Take advantage of any features in your financial accounts that can help you scale back by, for example, providing transaction categories.
Scan for Unused Subscriptions or Forgotten Recurring Expenses
Your statements will help you understand exactly what you spend money on. You may discover you’re paying for things you don’t use or want. For example, you may discover that you signed up for a gym, or an online newsletter, or a meal service, that you can do without. Highlight these items and start a list of which accounts you should close. Having only one expense for entertainment can add simplicity to a budget. You may want to choose one streaming service rather than several services plus a cable TV subscription, for instance. Include specific descriptions like, “I want to close two accounts per month and put that money into my savings account” or “I want to cut my overall budget by 10% through a combination of changing how I spend and cutting down on subscriptions.” Specific objectives like these can help you follow through.
List Your Necessary Expenses
Once you’ve trimmed the items that you can live without, turn to your necessary expenses. Identify each necessary expense that you spend money on regularly, like:
RentMortgage paymentsTransportationFoodClothingUtilitiesInsuranceTaxesMedical treatments
Then, determine the average payments for each type of important expense. You can keep your categories simple, such as using the five-category budget’s list of transportation, debt payoff, savings, housing, and other living expenses.
Close Accounts
Having multiple accounts can be time-consuming and add to your expenses with extraneous fees. Companies are often incentivized to sign people up for subscriptions and recurring payments, so it makes sense that we can upgrade our services for more than we actually want. Set a date to review all of your accounts at least once a year and cancel the accounts you don’t use, whether it’s a streaming service or a department store credit card. Some necessary expenses can be reduced without being cut entirely. You may have success getting multiple quotes from internet service providers, utility companies, or insurance companies, and then using those quotes to negotiate a lower rate or switch to a cheaper service.
Consider Where To Put Those Extra Dollars
After you identify ways to save by cutting expenses and closing accounts, you can plan what to do with that extra money. Here are just a few options:
Pay down debt.Contribute to an emergency fund so unexpected events won’t derail your budget.Put it toward savings for a vacation or another major purchase.
If you want to prevent your expenses from creeping up again, consider using a simple budget template to make a plan for tracking expenses going forward. This can help you think twice about signing up for things you won’t use.
