Today’s question is all about budgeting, “how do you identify and cut those unnecessary expenses?” It’s all about creating a budget.

What are Your Fixed Expenses?

Budgeting gets such a bad reputation, what is budgeting? Budgeting is the difference between telling your money where to go and asking your money where it went. The easiest way to do this is to figure out all of your fixed expenses: your mortgage payment, your car payment, your insurance bill, your tax bill, the water bill, everything that you pay for in relatively the same dollar amount every single month. Those are your fixed expenses.

Discretionary Expenses

The easiest way to determine what those other expenses are, the discretionary expenses, is to print off a credit card statement, or look at your checking account or bank statement. Do this once a month and then once you get a feel for where the money’s going, then you can fine tune it every quarter. The most important thing is figuring out where those discretionary dollars are going. How often are you going out to eat? How often are you buying tickets to a to a sporting event, or a concert? What type of gifting do you do on a somewhat regular basis?

Again, the easiest way to determine where those unnecessary expenses are going, and then ultimately cutting them out of the budget altogether, is just that: you’ve got to create a budget.

Thanks for joining me, I’m Nick Colantuono, CFP® and I hope you found this information helpful!