When I started working in the summer of 2003, I kept a pretty diligent budget. My friend Melinda sent me her “Budget Bible” excel spreadsheet as a guide and I tweaked it so that it fit the budget categories I was most curious about. I kept up with it for about six months, until I reached a steady equilibrium, and then dropped it.
One of the most valuable parts about keeping the budget was that it helped me identify financial leaks I was otherwise unaware of. I could discover these leaks and easily plug them, saving me hundreds of dollars in the process.
A financial leak is when you have a series of expenses you didn’t know you were spending so much on. They’re often small, irregular, and easily overlooked. Buying a cup of coffee at Starbucks each day is not a financial leak – you know you’re spending that money (and you get something for it, you get coffee in the morning). While some would argue that you’re overpaying, I think we’re all adults here with different preferences so that spending wouldn’t be considered a leak.
A leak is more like an ATM fee every few weeks because you’re getting cash from another bank. You know that you’re being dinged that ATM fee but you might not realize you’re getting dinged as often as you are. A $5 fee every other week is over a hundred dollars a year – that’s a leak that can be easily plugged.
How do you know if something is a leak? You’ll know it when you see it and it’s different for everyone. You might see yourself spending a thousand bucks a year on coffee as a leak whereas someone else would see it as a cost of waking up so early. You might see 5 ATM fees a year and consider it a leak whereas someone else sees it as the cost of traveling. Either way, you’ll recognize it without any problems.
How do you plug it? Usually you just need to add a little more planning on whatever you do. If it’s coffee, buy a coffeemaker (or get a free coffeemaker) and remember to program it in the morning. If it’s ATM fees, remember to get more cash out or try to utilize your credit cards more often. It usually comes down to preparation.
Whatever you do, don’t beat yourself up about it! It sucks to see a hundred bucks frittered away on ATM fees and easy to wonder what could’ve been, but be happy you discovered it now rather than in a year… or never. We all make mistakes, we should be happy to discover them after only a hundred bucks of pain rather than a thousand (or more!).
(Photo: johnx62 )