First Person: Budgeting for Our Biggest Costs

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I've tracked my portion of our expenses for years now, and in so doing, I sometimes tend to fixate on smaller items that can be trimmed down when it comes to costs. And while focusing on the more minor expenses can have a greater impact over time (and I have to start some somewhere), sometimes it's a case of not seeing the forest for the trees, and losing track of those bigger ticket expenses that I might be able to take a hack at can cost me big time.

Part of handling our bigger costs comes with examining all our costs, not just those everyday items that come along like food, utilities, clothing, and transportation.

Outlining Everything

In years gone by, I've focused more upon my personal spending and less upon our family's spending as a whole. As our family has increased, so have certain expenses that are covered by my wife such as our health insurance costs. Therefore, I recently took the step of outlining everything so that I could get a better understanding of what our entire cost structure looked like and the amounts involved. This way I could pinpoint our greatest expenses, which lay in cost categories such as health and medical costs, housing related costs, food and entertainment expenses, and transportation, the entirety of which accounted for over 75 percent of our total budgeted expenses.

Breakdown of Costs

The next step I took in the process of handling our biggest costs was to determine which ones were fixed, which ones were fixed but variable in amount, and which ones were discretionary expenses. Doing this helped me determine which costs categories we could actually work toward minimizing since some items like our condo association fees, property taxes, or health insurance premiums are pretty much set in stone.

Tackling Costs We Can Do Something About

The final step in my process to tackle bigger budget expenses came in the form of determining which items on my list were ones that we could do something about. Here are the items that I nailed down as costs we had some control over reducing:

  • Transportation costs
  • Food/Entertainment
  • Vacation
  • Utilities

Unfortunately, what I realized in this process was that some of our bigger costs were items that I could do little to control. However, with things like transportation costs (gas, vehicle maintenance, insurance, etc.), we realized that my wife looking to work closer to home could possibly cut $2,000 or more off our budget through things like reduce gas costs, less wear and tear on our vehicle, and lower insurance premiums. And while our food and entertainment budget lines is already cut pretty thin, we feel there is a little bit of room left here to cut by way of maximizing our food purchases and minimizing entertainment costs. The same goes for utilities costs. While already very low, my outline pinpointed that there was a thin layer of fat to cut there through electricity cost cutting and possibly cable/Internet/phone expense reductions. And finally, while the idea of cutting the family vacation is one we don't like to contemplate, it is an expense that we have direct control over, and while it only accounts for about 2.75 percent of the annual family budget, it is something that could be eliminated should it become necessary.

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Disclaimer:

The author is not a licensed financial professional. The information provided in this article is for informational purposes only and does not constitute legal or financial advice. Any action taken by the reader due to the information provided in this article is solely at the reader's discretion.

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