Recurring Expenses Will Kill Your Budget-Choose Wisely

As someone with a bunch of regular expenses, I know that they add up.  I also know that you’d have to pry my laptop from my cold, dead fingers before I’d voluntarily give up the internet.  In my husband’s case, cable is a necessity.  How do you choose between one recurring expense and another? Prioritize.

Each one of us has an amount we earn and an amount we spend.  As I’ve stated in my Steps To Financial Stability, you want the amount coming in to be much larger than the amount going out.  That only happens if you carefully choose to spend your money on what’s important to you.  You don’t have to give up your daily $4 coffee or your lawn service, but you do need to make sure it’s more important to you than other things you could be spending on instead.

To get started, my husband and I took a look at our income and figured out how much we actually needed to live on.  This means, take a look at how much do you actually need in order to survive – housing, food, utilities, etc.  Then we chose how much we wanted to save – up to matching on my 401k, at least one Roth IRA, $2500 a year to Scottrade, etc (you can see our current budget here).

After making those two decisions, we knew how much was left for the extras.  Choosing was just a matter of asking ourselves what we wanted the most.  Pets, cable, internet, and a housekeeper were the first things on our list.  Those four things added up to $300, which was $50 more than what we had leftover at the time.  We had to hold off on hiring a maid until one of us got a raise – specifically, my husband and I received a cost of living adjustment a few months later.  Jacqui, our housekeeper, was hired less than a month after that.

We’ve added a few other things over time, but we’ve also increased our income and savings.  The key is making sure that you balance your savings and expenses.  If you prioritize, you’ll know what’s important to you.  That makes skipping a splurge item much easier since you’ll have something even better on your mind.

Case in point, I still buy a package of Oreos from time to time, but it’s been much easier passing them up on a regular basis since I know I like annual vacations even more.

How about you? What are you willing to put into your long-term budget?

This is a guest post from Crystal of Budgeting in the Fun Stuff: A Personal Financial Blog about the Next Financial Step. It’s an open fiscal diary and a personal finance blog rolled into one that is looking to get as many people involved as possible.

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Published or updated May 11, 2013.

Comments

  1. Recurring expenses are always a bad idea – whether it is a lease on your cable box or you subscribe to a fruit of the month club. The reverse is true as well. Recurring savings, no matter how small, adds up to a nice chunk over the long run.
    .-= MoneyCone´s last blog ..A bank that’s better than Ally and IngDirect? =-.

    • How do you mean that recurring expenses are always a bad idea? I would say we need to limit and prioritize them but many are necessary. Home ownership comes with many expenses but I wouldn’t say owning a home is a bad idea (it can be for some).

      • Agreed some are not avoidable. A home, as you mentioned is a good example. But when there is an affordable option to purchase instead of making monthly payments via leasing or renting, in the long run that almost always wins out.

        Renting appliances or furniture in my opinion are always terrible decisions.

        When I bought a car, I decided to pay outright (of course this is not always possible for everyone). Sure, that was a big hole in my savings, but saved a considerable chunk on compounding interest. I used to pay for gym membership, but was hardly using it – decided to pay per use instead.

        On the other hand, if you have interest free monthly payments on a purchase, that would make sense than an out right purchase. You can use the balance saved up in a high interest savings account.

        But I agree, it is all about your priorities. What’s prudent for me might not be for another.

        I like how you decided to hire a maid after waiting for a raise. Calculated, prudent move.
        .-= MoneyCone´s last blog ..A bank that’s better than Ally and IngDirect? =-.

        • Thanks, we wanted to make sure to stay under our fun money budget.

          I agree that recurring monthly charges can be the most costly, but that’s why we prioritize.

          My husband has literally put cable in his “needs” category and I really wouldn’t be happy without high speed internet at home. If we were having a hard time making ends meet, we’d do without, but in the meantime, cable and internet receive a very high priority in our household. In fact, the only things that come higher are basic living expenses and savings. I’m good with that. :-)

          MoneyCone, you don’t have any optional recurring monthly fees other than a house? No internet or cable or Netflix or anything? That’s pretty astounding.

          In Houston, everybody is so spread out that driving to see friends is usually reserved only for those that live within 10 miles and weekend trips to see the rest. Since most of our friends are in that weekend category (45 min away), we use cooking, the internet, and cable as weekly evening entertainment. It’s just a lot cheaper than hanging out at the bar or wasting a tank of gas for an hour visit before bed. BUT, I know reading a book from the library (which we do before bed) would be even cheaper. We just really like tv and blogging too. :-)

          • “MoneyCone, you don’t have any optional recurring monthly fees other than a house?”

            Of course I do! :) I don’t own a house, but the usual – netflix, cable, cell phone and what not. Did eliminate a few – newspapers, magazines. Thinking of moving to a pre-paid plan for my cell phone.

            Cutting recurring expenses is a constant battle!
            .-= MoneyCone | Personal Finance´s last blog ..A bank that’s better than Ally and IngDirect? =-.

  2. Ha, I also would never give up Internet. But I would live in a windowless room for a year to save 300+ on rent and put that money toward student loan debt.

    As long as you’re increasing your savings over time, you should never feel bad about increasing your spending as well.
    .-= Daniel´s last blog ..Free iPhone and 2 Months of Free Service =-.

  3. A phrase I’ve heard is – “You can have anything you want, but you can’t have everything”.

    Went through this exercise during a counselor training and it showed very interesting results. Eventually the prioritization gets to the more individual lifestyle of the person.

    Going with the example of phone & internet – I have neither a landline nor TV so those (Phn & Int) are my primary methods of communication/entertainment. I can justify the higher costs of premium internet because its offset by the money I don’t pay in cable fees.
    .-= FinEngr´s last blog ..Yakezie Weekly Round-up: Better Late Than Never =-.

  4. Hey,

    We racked up a number of recurring expenses a few years ago before learning tips on budgeting like you mentioned above. Since then, we’ve cut cable, reduced phone/internet/cell costs by bundling and I’m even riding my bike to work at least twice a week now, which will save me about $20 a month in gas.

    Cheers,
    .-= Guy G.´s last blog ..Grocery Saving Tips – Tips on Budgeting =-.

    • Guy G, that’s great! Healthy too, which will hopefully save you a bunch on medical costs down the road as well. :-)

      I don’t think we’re ready to let go of cable, but we are planning on a few cuts elsewhere (some restaurants and Massage Envy need to get the heave ho).

      My car broke down today (well, overheated, smelled bad, and had to be towed to my mechanic), so depending on the cost, we may have to cut a few more things to make room for another very small car payment…we don’t have quite enough for me to buy my next car with cash yet. I’m crossing my fingers for a fix that’s less than $500 at this point…I’d be gaga happy if it was less than $250.

      Stupid car is a 2005 Chevy Aveo with less than 45,000 miles that gets maintenance by its book (I follow the manual). I’ve already had to pay $500 for a new belt and 02 sensor at the end of last year. I see a different brand in my future. My husband has had his used 2007 Toyota Prius for 2 years and has had zero issues. Maybe a used Yaris…
      .-= Budgeting in the Fun Stuff´s last blog ..Did You Know Car Financing is Negotiable? =-.

  5. This just shows the power of a well thought-out budget! Nice job!

    With me, I don’t really have a detailed budget, mine is more automatic. But with making it automatic, I have less fine control over my inputs and output of money. So I live a little more conservatively than I have to…

    Great article!
    .-= Money Reasons´s last blog ..MoneyReasons Weekly Cache 2010, April 18 =-.

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