Do you have leaks in your cash flow?
I started working on a plumbing project.
The very first shut off I turned off leaked.
A lot.
No problem. Gate valves tend to leak when not used regularly.
I capped it.
It still leaked… a lot.
Once again, no problem. I can just shut off the water in the basement.
Nope.
Absolutely no shut offs in the basement.
Next step: shut off the main and install shut offs. Everywhere.
It may not be the most fun thing to do. And it will not garner the “oohs” and “ahhs” of those before and after bathroom remod pics.
But it will make life so much easier- and better- in the long run.
Our finances can be very similar.
We start looking at making changes.
We find where a little money is leaking out. It could be an unused or underutilized subscription.
Then we find another leak, like all those little purchases that do not seem like much in the moment, but can really add up.
Finally, if we really want to tighten up our budget and create empowered spending patterns, we have to stop the outgoing free flow of cash temporarily and really take a look at where all of our money is going.
(this is where I have to add the disclaimer that I am by no means advocating you do not pay your bills)
Now, if you pay cash and do not hold on to your receipts, you may have to collect some data, either in the form of receipts or tracking in a notebook, before you can do this step.
Once you have at least one month of data, put every payment into a category. You can choose the categories, but it could be “housing”, “food”, “fun”, “incidentals”, “health”, etc. If you have a year, that is even better because it accounts for seasonal fluctuations in bills.
Take a look at your categories. Any surprises?
The easiest changes are those that you will not miss, like that unused subscription that you did not realize you were still paying for.
The slightly more difficult changes will be to those things you enjoy, but did not realize were costing so much.
The most difficult will be those things that you really enjoy and can come up with a million reasons to justify continuing.
As part of my Money Mom Academy I have a spreadsheet that will help you with this exercise. But you can completely do it on your own using pen and paper or a spreadsheet.
Here is the thing: You do not want to completely cut all of the “fun” expenses out of your life. This would be like trying to live the rest of your life without your favorite foods. But, you may need to cut back a little, especially in the short term.
The other thing you can do is figure out ways to either cut other expenses so your budget can accommodate the things that make life worth living… OR… increase revenue to pay for them.
If you get stuck while completing this exercise, please let me know and I would be more than happy to help. Have you ever done anything like this before? Please share below! 🙂
I actually go through this exercise at least annually; more often if I have a change in my finances.