# Fix Your Finances in 30 Days

## Day 22: Evaluating Your Expenses – Monthly Services

Our small monthly expenses add up and eat away at a good chunk of our monthly budget. Though you might think the cable bill is only \$60, you also have a Netflix bill, a broadband Internet bill, and the occasional movie rental – all of these items add up! Controlling your monthly expenses is essential to healthy finances and reducing or eliminating some of these expenses will be the path for many of you to financial freedom.

Some of your monthly expenses are essentials – such as electricity – while others are not essential – such as cable TV. Today, we’re going to review each of your monthly expenses to see if any of them can be reduced or eliminated.

First, make a list of every monthly bill you pay. Cell phone, cable, internet, electricity, mortgage, rent, insurance, and so on. Write the approximate amount you pay each month next to them, but leave some space over to the right for some more calculations.

Once you’ve made this list, cross off the ones that are fundamental for day to day life. Electricity is fundamental, while internet access is not. The mortgage is fundamental, while Netflix is not. Loan payments are fundamental, while cable or satellite television is not.

Now multiply each of the remaining elements by twelve so that you can see how much the bill is costing you in a year. You should also multiply that yearly amount by 1.025 (2.5% more, in other words), because that’s how much you’d have if you put that bill amount into savings each month. Multiplying out the bill amount like this can often make a reasonable bill seem crazy. For example, if you pay \$19.95 a month for Netflix, that’s \$245.39 a year towards your life dream that’s going away. Spend \$50 a month on cable? That’s \$615 towards your dream gone forever. Got a \$200 country club membership fee? \$2,460 a year goes poof.

At this point, go through each item and ask yourself whether it’s worth what you’re paying for it. It might be worth it to you right now, or you might realize that it’s something you rarely use so it’s not really helping you build towards your dreams. Most likely, you’ll find ways to reduce that bill without eliminating it. Maybe you can go to a cheaper plan on Netflix (\$61.50 saved a year), or you could eliminate \$15 worth of premium channels from your cable bill (\$184.50 saved a year), or you could get a less expensive calling plan from your cell phone provider.

After we did this exercise, we decided cable TV was not a necessity and cut it. Two years later, we haven’t missed it a bit, find more time with the family, and watch all the TV we want with over the air HD and Hulu on a PC hooked up to the TV. This combined with Redbox provides all of the entertainment a family could need. Do we miss Food Network, Discovery, and ESPN? Sure we do! But those channels aren’t worth the loss of our dreams and our goals.

It’s important to remember that even though each cut seems tiny, if you’ve been following the plan this month, you’ve trimmed away a lot of fat from your budget without really affecting your way of life all that much. Depending on your choices, you may have dropped ten percent of your expenditures already; if you take that ten percent and use it to pay off debts now and later invest it in your dreams, you’ve literally taken a dream that seemed impossible and transformed it into something possible.

Tomorrow, we’ll look at some effective mechanisms for battling bank fees.

### Today’s Assignment

Create a list of all of your monthly expenses. Cross off the items that are essential. For the remaining non-essential items, multiply the monthly cost by 12 to find out an annual cost. Multiply the annual cost by 1.025 to find the cost in lost of savings interest. For each item, decide if it’s necessary and can be reduced or eliminated.

Ready? Let’s continue on to the next day.