How to fix a leaky budget
How do you manage your finances? I personally ensure that all my pending payments are on time. I clear off all my major debts like student loan, house rent, and car payments etc. on time to see that everything is in order. After all the planning, whatever is left at the end of every paycheck goes straight to the savings and retirement account. A small amount is kept aside for entertainment. This made me confident that I am a financially responsible adult.
Recently I glanced over my bank statement. I was not expecting to see the amount it showed. It was less than what I’d planned. I quickly checked the entire statement to try and find where the money went missing. As far as I remember, I hadn’t bought any expensive gadget or spent money on night clubs. It soon hit me, the small charges that were accumulating over time were the culprit here.
No matter how watertight your planned budget is, these small charges can poke a hole in it. Let’s look at some of the common costs that may creep in your financial budget.
The most commonly ignored small charges that we forget to account for are the bank fees. Banks hold our money and they charge a small fee for it. There can be a penalty for not maintaining a minimum account balance during a particular duration. There are also some maintenance fees levied from the customer. These charges vary from bank to bank.
These can be saved by asking the banker for ways to avoid those fees. Like by knowing the total number of free transactions that are allowed or the minimum balance that needs to be maintained in the account.
Membership and Subscription Fees
If you have online subscription for news portals, music services, games, and podcasts then these services are a major source of budget leakage. In most cases you have access to limited content and have to pay in order to get the entire unrestricted service. Most of the times these services are charged in the background and you are not even aware of it. They accumulate over time and cause a big number in your account statement.
Buying a subscription and forgetting it is a major reason for such a leakage. Identifying all such services and then determining the priority in which they should be renewed or cancelled altogether will give you a good idea of managing them. This will save you a good amount in the long run.
Fees for Online Services
Apart from entertainment, there are few online subscriptions which may be a requirement of your work. For example monthly access to an online photo editing tool, unlimited access to a professional images website, paid subscription of marketing email plans etc. These expenses being part of the work are often overlooked.
Although these service subscriptions are very important, it is necessary to keep a check on these expenses and also keep a track of changes in the subscription fees over time. For example, a subscription started for $10 in the first month may have a renewal fee of $30 in following months. This will never be accounted in budget planning and lead to a big leak.
While most of the youngsters are moving towards subscription based online channels, the demand for cable television still exists. These subscriptions keep changing over time and possibly you are paying for the channels that you don’t even see any more. We are well aware that even for a single channel, we end up buying a whole package and this leads to a big amount at times.
Packages for entertainment, movies, sports etc. make sense but there are chances that they are not fully utilize and these expenses can be well managed by monitoring change in subscription charges. This will add to your management activities, but it is worth it as you may end up finding a big expense leak that can be fixed right away. Keep an eye on available online services for these channels which will help you to cut down on the expenses and plan them well.
Planning and managing budget is very different than managing investments. And not all have a good understanding of it. Most people have an investment plan that is managed by a paid app. Such apps get money directly from the account when purchases are made. Not monitoring the investments daily can lead to an accumulated few extra amount over a period of time. Every investment purchase has an associated cost which aggravates over time and becomes and it is no more negligible. This will lead to loss of savings as planned.
These aren’t costs per se, but lack of planning to manage these little charges will lead to a considerable amount being lost from the savings. After all it is easier to remember a major expense, but several smaller expenses will be overlooked over a long period of time.
Sub-memberships or Add-ons
These are some of the most overlooked expenses. You have a subscription for an online service that provides you with a set services. Now you are in need of an additional service that is not covered in the original subscription. This could be an extra sports channel not covered in your sports cable package or an extra movie channel not covered in your online entertainment package.
These sub-memberships are taken for a small time like a month or so to get that missing channel. However many forget to cancel that subscription over time and it keeps on continuing without you realizing. An extra HD channel subscribed for football season should be cancelled at the end of the season else it will keep on renewing while you don’t even watch it anymore. Reminding yourself to end a subscription after it is no longer needed will help a lot to manage the untamed expenses.
Donations to a Charity or Cause
Donation is a good deed. It makes you feel better when you give away something for charity knowing that you did your bit. We end up making a recurring monthly donation to charities and then forget to keep a tab on it. This has a feel good factor to it but it will also add to your budget leakages. However it is necessary to know that these charities will help you save on taxes. So a balance of how much you give and how much you save will help in planning what is required.
A near perfect budget can be subjected to numerous minor unplanned charges. It is always a good idea to keep a thorough check on your expenses every now and then to ensure that your budget stays watertight.