11 Tips to Increase Your Cash Flow – Budgeting Gives you Freedom Part 2

Welcome back to the next session in our series about budgeting! In Part 1, we looked at the first two steps in our budgeting plan. As a quick refresher, we looked at what a budget is and the purpose, as well as the freedom it offers. Then, we looked at our list of possible budget categories so we can grasp the big picture of our finances. Here’s our roadmap:

  1. Understand what a budget is and how it functions!
  2. List all possible budget categories
  3. Fill out the budget with known expenses, and make adjustments as necessary
  4. Put budget into action

If you missed Part 1 of the series, give that a read before moving on!

The next step in the process as laid out above is to fill out the budget categories and to make adjustments. Let’s talk about that!

THE KEY IS UNDERSTANDING

As we begin to look through our list of growing expenses, we must continue to make adjustments to stay on track with our big picture goal – to reach Financial Independence. If that’s a new phrase or concept to you, I recommend checking out the following post: 

Start Here

Financial Independence is the path we’ve chosen to follow regarding our ‘financial’ life. In short, we want to pursue a life free from the conventional career and retirement path that most people take. To do this, we need to keep our expenses in check, and grow our income!

Working through our budget, it’s clear that there are certain expenses we need to begin saving a bit extra for – namely Baby Pocketchange! There are so many articles, blog posts, and news stories about how much it costs to raise a child. A quick Google search comes up with $233,610 through age 17 or about $14,000 annually.

Yikes.

Okay, breathe. We can do this, we just need to understand our budget. After you have your list, using an app like Mint can give you estimates on your various categories if you have maintained them. Fill our your budget with what you estimate the expenses will be, then think through each category with some of the following questions: 

  • Does this amount make sense in our financial plans/goals? Do we need to adjust it higher or lower?
  • Do we need this product/service/subscription?
  • Does this expense contribute to our family goal(s)/plans?
  • Can we find alternatives that will still provide for our needs?

It does help to write down your current income level on your list! After reviewing your budget, perhaps you need to ask the *big* question.

WHAT DO WE CUT OUT?

By now, you should have a decent list of your budget categories and an understanding of what you’ve spent or expect to spend. After you’ve reviewed each line item, perhaps you’re stuck and not sure what the next step should be. It could be time to ask “what can we cut out” or “how can we reduce our costs?” 

There are a ton of ways to save cash on your expenses, you just have to put in some work to get it done. Most folks can find some extra cash in the form of a reduced monthly bill by changing their phone carrier plan, or car/home insurance to a cheaper option and still maintain similar coverage. Shop around!
 
We currently use Mint Mobile for cell phone service, and save about $1,000/year on our cell phones from our old plan! That translates to a potential savings of  $25,000 over the next 25 years – Awesome!
 

Back to our budget. What did we decide to cut out? Well, that’s the problem we’ve had for some time now. We’ve already ‘followed our own advice’ and have cut down and cut out several unnecessary budget items over the years. But, here are some recommended categories to review in your budgets or other thoughts to consider (in no particular order):

  • Car Insurance – Good to shop around every six months to a year. This has helped us save a few hundred dollars over the past few years. Sometimes you can even get a discount for paying in a yearly amount vs monthly.
  • Cell Phones – Good to review any time, especially if you are NOT locked into a contract. This can bring in some decent monthly/yearly savings like ours!
  • Land-Line Phones – Do you need a land-line phone? If you have a cell phone, then that answer is an equivocal no. Cut the cord, and save some cash!
  • Cable – Do you need all those channels that you don’t have time to watch? Opt for a streaming service like Netflix or Hulu. For a fraction of the cost, you get a wide variety (albeit sometimes odd) of shows and movies to watch.
  • Homeowner’s Insurance – Never hurts to get another quote, or even try to combine with other services (car insurance) to get a lower bill.
  • Subscriptions – Do you need a subscription to news/magazine sites or several streaming sites all at the same time? Consider trimming down to one or two services and switching every few months once you’ve had your fill.
  • Meal Planning – Not a bill, but planning out your meals can lead to a lower grocery or dining out budget. This has helped us out time after time and is reflected in our increased eating out expenditures. Since Mrs. Pocketchange (as the primary cook in the house) hasn’t been feeling that great, we’ve eaten out a bit more than usual.
  • Early/Automatic Payments – Some merchants or bill vendors will give you a discount on your bills if you make early payments or if you set them up for automatic payments. Review recent statements or give them a call and ask!
  • Live simple lives – Sometimes we get caught up in wanting to live like the Jones’s, but living outside of our means is not sound advice. Consider selling those expensive items that “contribute” to status but not your financial well-being, especially if you have credit card debt!
  • Alternative Lifestyles – Consider thinking about how you can change your lifestyle. For example, if you live within riding distance, ride a bike to work! This can save gas, car maintenance and repairs (think tire costs, engine work, etc.), and the risk of having to work on/replace your car in the event of an accident or breakdown. That’s a fair bit of savings all wrapped into one.
  • Pay off your credit card statement balance in full each month! – This is super important. If you only pay the minimum payments each month, you are not only incurring interest charges (which is just giving the credit card company free money), but you aren’t managing your finances well. You are overextending yourself, and for what? Credit cards should not be used as a holdover to get you through to next week or month. Budgeting will definitely help in this area.
So friends, what expenses are you going to think through? Did you find anything revealing in your budget, whether it be ‘bad’ habits or larger-than-expected expenses? Let us know how you did. Next time, we’ll talk about putting your budget into action!

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