No matter where you are in your financial journey or situation, we Finance Sisters believe it is important to take control of your finances. A key part to this is to know and be in charge of what you are earning and spending.
An important part of Step 1 of the 5 Finance $isters $teps therefore, is to take stock not only of your overall financial situation, but of your incoming and outgoing money. We recommend tracking your spending over a period of time (1-3 month) to get a full picture and transparency - which will enable you to identify some major savings areas.
However- you might not have the time for this right now and want to get started straight away to create a bit more financial wiggling room or to use freed up cash to put into your investments or savings.
To recap the main points:
- A quick scan of your banking and credit card statements can reveal quick and easy areas for savings potential
- Start with a small step today, the other ones will follow naturally
Actions for you to consider next:
- Take 30-60 min to go through your banking / credit card statements
- Check / take action on the following items
- big unnecessary spending areas
- subcriptions
- main contracts like utilities / insurances
Get started now
All it takes is about 30-60 minutes of your time and you will need a computer (or phone) and a notepad to do a Quick Scan of your Bank and Credit Card statements. Simply log into your bank and credit card accounts and download or display an overview of 3-6 months worth of spending. Ideally, your bank might already have a tool to provide a visual overview of spending categories - there are also some useful apps that can classify bookings automatically with very little need for adjustments.
From this data, have a look at 3 key areas and take some quick and easy steps that can save you hundreds of dollar (or Euros or your currency) a year! Of course, there are certainly more things you can do - once you dive into your data, you might get other ideas. Knowledge is power!
Another way to look at it is that you are reviewing your finances to help you better prioritize your spending. What areas can you spend less on that you don't care so much about, compared to other areas that you love to spend on and want to prioritize. By simply having the right information you are empowered to choose what you spend your money on.
3 key areas to look at
1) Spend buckets - get a quick idea what you are spending your money on. Think of big categories like housing, fixed costs like insurances, groceries, going out/ entertainment costs etc. After making that broad categorisation, check the "non-essential" categories, such as going out/ entertainment / takeaway food / sundry expenses and see whether you can / want to cut back. Seeing them in monthly amounts is a different thing than just spending on the go.
2) Recurring expenses / subscriptions - ideally, your bank or credit card statement will reveal also recurring expenses you have. The main focus here should be on subscriptions. Which services are you currently subscribed to? Netflix, Spotify, Apple or Google Music, Amazon Prime, (Beauty / Food / Gadget etc.) Boxes are commonly enjoyed these days and while on the surface there is nothing wrong with subscribing to services you truly use, there can often be a whole "legacy trail" of services that are not used as often anymore, are partly covered by other services (e.g. overlap between Netflix, Spotify, Prime) or were some "introduction" offers that are long forgotten and running at higher rates. Don`t be afraid to cancel those services you do not need or use anymore- the savings over a year`s time can be substantial!
3) Insurance and other main contracts - even though those technically classify as "recurring expenses" its worth putting them into a separate category as you can not usually cancel them easily and they represent expenses that you can't just cut out (like your electricity or water bill). However, that doesn't mean that there are no easy savings to be had here. Firstly, review the contracts you have and see whether you really need them - for insurance, check what is insured and why, for contracts like internet / phone check whether you really need the chosen level of service. For all contracts, do a quick check on how old they are and what "going rates" for those services are. Best is to use a comparison website (google for your country). Once you established current prices and services (and, as a rule of thumb, offers are often better than what you currently have), you have the choice of either switching suppliers or re-negotiating your current package. This might sound both cumbersome, but with many comparison websites also supplying switching services, often, this is done by simply clicking a button. Be sure though to understand new offers to not fall prey to "introduction only-rip you off later" offers. Even negotiating with your current supplier can be surprisingly easy - in the case of phone and internet, we were able to get very similar offers to the market by simply threatening the supplier to leave within a 5 min phone call. Do not be afraid to ask- those businesses might have made very good money off you in the past so why shouldn't you enjoy a good rate like a new customer?
A final word
After reading this, you might feel overwhelmed or possibly do not find it quick and easy to take those steps. We hear you and we promise you, once you get started and have that first overview, the steps will fall in place in front of your eyes. You do the first, see the rewards and see it will get easier with each step forward. And - as mentioned above, armed with your new insights, you might think of many more things to change. Let us know in the comments below! Lastly, you do not need to do every single thing today or tomorrow. As with all our steps, just get started, and see where it leads you. Even one subscription cancelled can already make a big difference!