An unfortunate part of normal life is having and managing monthly living expenses.
Long gone are the days of a carefree childhood and not worrying about paying various bills. Those were certainly good memories!
But alas, adulthood appears quicker than you may realize and now you are trying to manage all these different bills.
It may seem easy to try to manage your living expenses without knowing what they all are or without a budget.
However, that can quickly be overwhelming and you can easily miss ways to stop overpaying and save more money.
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Why Knowing Your Monthly Living Expenses Matters
Knowing what you’re spending your money on every month is a great first step to take control of your finances.
One of the best ways of getting an accurate picture of your overall finances is knowing where your money is going every month. This will help you see clearly what expenses can be cut and what cannot.
If you don’t track your money, it’s difficult to see whether you’re spending too much on travel, shopping or utilities — it’s also difficult to determine how much you can save over time.
On top of that, knowing where your money is going every month makes it much easier to create a budget and set goals.
A goal could be to put a specific amount of money every month or year, or have enough savings at the end of the year to put into investments.
It’s simpler to reverse engineer long term goals and figure out how much to save every month through a budget.
Finally, tracking your expenses will help you notice any bad spending habits that you want to stop. You’ll quickly be able to see what your spending weaknesses are and what you need to correct so you can be more in control of your finances.
It’s also a great way to stay on top of any expenses that you don’t remember making, in case they may be fraudulent and you need to contact your bank, credit card company, etc.
What Are Typical Monthly Expenses To Know?
Keeping track of your monthly living expenses doesn’t take a lot of time and can make a big difference to your financial health in the long term.
It will help you curb any impulses, remove any purchases that unnecessary and help you save more — maybe even retire earlier! Here are the typical monthly expenses you should always be monitoring.
The largest expense for most households is the rent or mortgage. This expense will vary a lot depending on where you’re living.
If you’re living in an expensive city such as New York or LA, your housing costs and cost of living will take up a larger proportion of your income than if you live in a city in the Midwest.
2. Utility bills
Along with your house comes… bills!
Most people prefer to keep their utility bills separate from their housing in the budget, since utility bills can vary depending on the month of the year. Included in your utility bills will be electricity, gas, heat, water and internet.
Unless you’re teleporting everywhere, you’ll need to pay for transportation to go to work, to go on vacation or visit family, and to generally get around.
For many people, transportation is the second-largest category on their expenses list — especially those who commute daily to work. Here you would include gas or public transport, as well as the cost of your car (maintenance and insurance).
A quick savings win is to shop around for car insurance. Gabi is a free platform that helps you easily find the best rates and savings on auto insurance. Plus, home insurance too if you are looking for options there.
One of the most important items on your budget: food. Average spending on monthly groceries is $550 in the U.S. — but this does depend on whether you’re feeding an entire family or just yourself.
And it also depends on how you shop — whether you look for coupons, sale prices, and other cost savings on food.
Currently, I know we spend around $120 per week, so anywhere from $400-$500 per month between two of us.
If you have children, you’ll want to include any child related expenses that you’re spending on every month. These could be day care expenses (if you do go the day care route), extracurricular activities and even new toys.
Did you know? Now the average family spends up to $16,250 per year for an infant, $11,648 for a toddler and $9,620 for a school-age child. (source)
Anything you do that is good for your health deserves its own category on your budget. This may be your gym membership or any outdoor activities that you may do regularly. Or even equipment and maintenance on those items as well.
7. Health insurance
Talking about health… if you don’t use employer-based insurance, you’ll need to buy your own health insurance plan. These costs vary depending on your habits, age, and where you live.
This can take up a huge proportion of your budget so make sure you do your research carefully. There is no doubt, medical costs are insane in the U.S. but it’s something to monitor too.
If your work does not offer a health-savings account, it might be worth starting your own to help on medical expenses or future ones. Lively health savings account is a great option and is easy to get started.
Call this the “fun stuff” section of your budget – these are the activities you do regularly that make your life more fun. This can include everything from eating out, items you purchase, vacations, etc.
You may keep a retirement category separate so you’re sure it’s a top priority. You likely are already contributing to your retirement through your employer, however setting some aside for your own investments is also good practice.
Most advisors recommend contributing an additional 10-15% of your income to put away for retirement. But I personally aim for as much as I can possible afford to.
The more you save, the sooner you’ll be able to retire!
If you want to make sure your retirement is on track and avoid hidden fees, use Blooom’s free analyzer. It works with 401ks, IRAs, and more.
How Do You Organize Your Monthly Expenses?
How you organize your expenses depends on your own personal tracking preferences and what will keep you best organized.
There are simple three ways to do this:
Pen and Paper
Some people prefer going old school and using a notebook and pen: it’s the cheapest option and all you need to do is write down all your income, all your expenses and then track those every day.
Other people prefer using an Excel spreadsheet. All you need is Excel (or even Google Sheets) and simply track all your expenses on one sheet. There are many budgeting worksheet templates available online for free that you can use, or you choose to create your own.
The main advantage with spreadsheets is that they are highly customizable and do all calculations automatically.
Online Software or Apps
Finally, many people prefer an online personal finance software or financial apps. These are free programs that help people with their budgeting.
Many of these programs will sync with your existing banking information and help you categorize your spending through an algorithm. These apps or platforms can automatically group your expenses, help you make plans, set goals and even save money.
An example of a popular financial software is You Need A Budget (YNAB).
YNAB is both a software and an app that syncs with your banking information and helps you manage your budget.
You can also look into Personal Capital or Mint, both are free to use and offer different features that help your finances.
Tips to Lowering Your Expenses This Year
Cut the cable cord
Removing your TV cable is a good way to save quite a bit of money on monthly expenses. It won’t be a massive game changer, but every bit counts when looking to lower your monthly expenses.
Netflix and other streaming services are much cheaper and often offer higher quality movies and TV shows. By switching to on-demand viewing, you can save anything from $40 to $100 per month!
Work out at home
Another expense that can take a big bite out of our monthly budget is the gym. Instead of paying for a membership every month, consider getting on Youtube and doing home workouts.
You’ll get fewer stares, dealing with people, and less commute!
You can also buy some weights if you’re looking to strengthen up. Fitness Blender is a good place to start for at-home workouts. There are also a ton of apps that offer free workouts too.
Shop second hand
Buying new clothes and items can be very expensive — that’s because often you’re paying for the brand name itself.
But if you’ve done your research and you know the quality that you’re buying, there’s no actual need to pay for a more expensive brand product.
You can also look into buying refurbished phones and laptops: same quality and much cheaper!
30 day challenge
Before making a big purchase, think about it for 30 days. This will give you time to figure out whether what you’re buying is truly essential or not.
If you forget about the item, then you’ve saved money. And if you still want to buy it after 30 days, you won’t feel guilty about spending the money!
This simple technique helps you think about purchases that you may be spending too much on. Give it a try and see if it helps you save money.
Sell your car
This tip really only applies to those who don’t use a car that often. If you could use public transport or could carpool with friends or co workers, consider selling your car.
Additionally, if you live in an area where you are close to work and most stores, you could consider riding a bike or even a motorized Scooter.
If not, consider selling your car, and buying a much cheaper and used model. You want to ensure it’s in decent shape so you don’t buy a lemon, but a user and general model can keep the total costs of gas and insurance down.
Negotiate lower fees
One potentially easy way to lower your monthly expenses is to negotiate with companies that you have services with.
Every year bills are going up and many times a deal you were originally locked in expires and boom — you’re paying double!
The best thing you can do is to try to negotiate. If you a good payment history and long-term relationship with a company, most are willing to help you out if you just ask!
And the same can be said if you are signing-up for something new, you can ask for fees to be waived as well. I’ve done this a few times with our internet and phone bills, which helped me save hundreds per year.