Reduce Your Living Expenses

Ah, spring! Time to clean the house. Plant the garden. Pay the IRS.

Every year, that April 15 ritual means we look closely at our finances. Every year, we say we’ll cut down on some of our expenses. And every next April 15, we say the same thing again. (Of course, this year we have until April 17th.)

That’s usually because we lack a specific spending – er, non-spending – plan. If you’d like the coming year to be different (and who doesn’t?), here are a few KMS tips.

Start by tracking one or two months of spending. Record everything – everything. Where does your money actually go? How much do you pay for gas? Netflix? Grande iced sugar-free vanilla lattes (with soy milk)?

We recommend spending no more than 28 percent of your gross monthly income on housing and related costs (like property taxes, sewer assessments, etc.).

In addition, no more than 15 percent of your gross monthly payment should go to debt repayment. And no more than 5 percent to entertainment.

You might start thinking about a more affordable home. That could mean downsizing, or moving to a different neighborhood or nearby community.

Refinancing could make a big difference in monthly payments too.

Examine your phone plan. Do you still need a landline? Are you paying for data you never use? Maybe you still cover your out-of-the-house-and-finally-on-their-own kids?

Check your cable bill. Do you watch all the premium content you’re paying for? Consider streaming content. It’s often less expensive – and just as up-to-date.

Look at your gym membership. Is it really part of your routine? Would another place give you more bang for your big bucks? Could you walk outdoors with friends, instead of on the treadmill?

Pore over your credit card bills. Are there recurring charges for services you don’t really use? (Or those you don’t even recognize?) Canceling them can take a bit of time. But a few dollars here and there add up – especially when you multiply them by a year.

Speaking of credit cards: Pay down your debt. It’s tempting to put it off. But the more you do, the more you pay for interest – not actual goods or services.

Whether you’re a single professional, an empty nester or part of a growing family, changing your spending habits requires a bit of planning and discipline.

Soon though, those new spending habits become routine. Then you’ll have to plan something new: what to do with all that money you’ve saved.

Got a tip or two to add? Contact KMS Partners: 203.454.5411