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Everyone can benefit from budgeting. No matter if you're rich, poor, or in between, it pays to know where you're money's going, where can cut expenses, where you can save, and where you can put money to ensure you have a nest egg for the future.
Acting on this information isn't always necessary, depending on your particular financial situation, but knowledge of one's own finances never hurt anyone.
Have you ever said to yourself; “Wow, I just don't understand where all my money went!”
You're not alone.
I'm a serial budgeter, and I keep track of pretty much everything. However, I frequently move around and travel a lot, so when the prices of goods changes, I usually have a couple of weeks before I get accustomed again.
One of my most recent challenges was getting my bearings on my food budget after returning to the US from China.
Food is cheap in China. Super cheap. I spent about $5 per day on average for 3 normal sized meals. In fact, my weekly beer budget was about twice the size of my food budget (no, I'm not an alcoholic, or anorexic).
But when I move to the US, my budget suddenly ballooned to about $400 dollars per month! I was not eating out, I was not buying gourmet or imported food. In fact, I was looking for sales, and I was still averaging about $300 to $400 dollars per month for one person. I just didn't get it.
Until I looked into what I was buying and how much it was costing me per meal.
I'm a bachelor, and lazy at that, so you can imagine that a large staple of mine was canned foods. I was especially impressed by the selection of cool sounding and wide-flavor-ranging soups that are available here (remember, I hadn't lived in the US for 10 years). So I packed up on them, thinking it would save me the time and energy of cooking soup for myself.
Little did I know that many of these soups were $3 per can. The same went for the baked beans and chili (Yes, I DO love my cowboy food) that I was buying. Add a few vegetables and a drink to each meal, and we're talking about $5+ per meal, or $15 per day – minimum to eat.
$15 x 30 days is $450 dollars, so that's about right. Factor in that I like imported and craft beer, which figures in at over $1 per beer, then a $400 per month budget isn't that much of a stretch.
So I searched the internet to see what other single young people were spending on their monthly food budgets and I saw numbers like $100, $150, and someone even said they spend over $200 because they ‘indulged' in a few high priced items.
I thought for a moment that I might have an eating disorder. How could I possibly be doubling the budget of others and not even try?
First, I cut out those soups and other cans. This dramatically reduced my spending in the food category of my budget. I immediately saw a price drop of about $50 dollars just by stopping buying canned, processed foods.
Next, I looked for boxed and other pre-packaged items like cereals, grains, and yogurts. I didn't cut them out all the way because do like that stuff and there's not a lot of alternatives, but there are huge price differences between name brand granola vs generic brand, and the same goes for the other things I just mentioned.
A box of brand name, specialty cereal can go for $5+, while a generic brand raisin bran is less than $2. Eat a box of cereal every week and you have a budget difference of $20. After figuring in other similar purchase choices and I save another $30-$40 dollars.
When all was said and done I cut about $100 dollars off of the grocery bill. If I can continue to keep it at this level, that's $1200 per year I can save. Of course, my story is unique, and my financial situation as well as food-buying habits, so you might not see such dramatic results. But the moral of the story remains valid.
If you don't know where your money is going, start a budget, and find out. You'd be surprised to know what your most expensive items are, and maybe even pleasantly surprised to know it's an easy step cutting out (or reducing) these things so you can save a bit more money each month.
Though the budgeting done in the story was done with a good ‘ol paper, pencil, and brain, for other budgeting stuff I use a service called Mint. It's free. There's a mobile app. And they track everything happening in your back, on your credit cards, and chart all spending habits. Find out where your money is going.
Do you have any good budgeting stories? Let me know in the comments below. I'd like to know what surprised you, or where your largest budget mistake was and how you fixed it.