How to Perform an Effective Expense Audit and Save More Money

coins-948603_1920If you need more money, one of the most realistic ways to achieve that goal is to cut your expenses. While one of the best ways to save more money is to earn more, some people can’t increase their income as easily as others can nor as quickly. Whether you can’t work extra hours for medical reasons, or it will take you several months to establish a steady stream of side hustle income, you can always start cutting your expenses today by performing an expense audit.

What is an Expense Audit?

An expense audit involves thoroughly going through your expenses and assessing the areas of your budget that you could be doing better with along with ways to reduce those particular expenses to free up more money. You should perform an expense audit at least twice a year, since expenses can increase at any given time throughout the year. Here are some main areas you should cover when performing an effective expense audit.

Housing

How much money are you spending on housing? While it’s not easy to just pick up and move whether you rent or own, you can do smaller things like compare your utility bills and determine areas where you can save, learn how to fix small things around the house on your own and avoid extra expenses like paying extra to park your car on the street or in a garage. Continue to seek out areas to allow your housing expenses to remain less than 30% of your take home income.

Debt

Debt is an expense that no one wants to deal with. If you have a lot of debt payments, see if you can consolidate it or refinance it for a lower interest rate in order to help you save money on your payments. These may not be the best solutions for everyone depending on your situation and the type of debt you have, but it’s worth taking a further look into. If you want to pay off your debt faster but still have money left over to save, you can always attempt to pay more than the monthly minimum payment but you will have to cut expenses elsewhere in your budget.

Insurance

Insurance is usually a necessity and sometimes a requirement. However, this doesn’t mean your insurance payments have to be extremely expensive. Review the insurance policy you are receiving for auto, health, renters/homeowners, and life insurance to ensure that you are paying the best rate for the best amount of coverage.

You can also bundle insurance policies to save money, compare rates online or even talk to an insurance broker about your options. Insurance brokers have access to a wide range of policies and coverage options and you can even check out Dave Ramsey’s Endorsed Local Providers list to learn more about your options when it comes to saving money on insurance.

Food

Food is probably another big area of your budget. If you track your expenses, you should be able to determine how much you are spending on groceries and dining out each month. If you don’t regularly track expenses, you can always sign up for Mint and connect all your accounts so the program can calculate your monthly food spending on average.
You can cut your food expenses by limiting the amount of times you dine out each month, creating a strict grocery list, shopping the sales and using coupons. All of these solutions do actually work. I’ve been able to keep my grocery budget at $300/month for my family of three for at least two years now.

Evaluate Missing Money and Extra Purchases

How much missing money do you have each month? I define missing money as the amount of money you spend that you can’t seem to account for at the end of the month. You know you probably spent the money on something, but have no way to figure out what it was or track that amount of money.

I view missing money as a huge loss. If you can’t remember what you spent money on, it might not have been that important. You can track expenses for everything with Mint.com if you feel that you can’t do it manually on your own to determine what your impulse purchases are. Also, set categories for household goods, gifts, and entertainment so those expenses don’t seem like a surprise when they come up.

Shopping at the dollar store for certain household goods and items or visiting the clearance section at stores saves me a lot of money in this area.

Have you performed a spending audit before? How much are you looking to save this year?

Posted in: Saving Money

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