Are There Leaks in Your Finances?

Chalana Williams, First Federal of Lakewood

Are There Leaks in Your Finances?

Sometimes, when it comes to your budget, it can be too easy to overlook the small “money leaks” that negatively impact your finances. You might do your best to avoid buying extravagant things, but if you’re still wondering where all your money is going, it’s time to identify and fix your money leaks.

What are Money Leaks?
Money leaks occur when you cannot seem to figure out what it was you bought with the money you spent. Even at the end of the month, when you review your credit cards and bank statements, it’s not apparent where your money went. Those are “money leaks.”

For instance, you buy something online, but when you get your credit card statement and see the purchase, you do not know what the charge is for because there is a vague description of the charge. Money leaks tend to cause problems with your budget and are often a big reason why many people cannot seem to save money.

How to Find Them
Do a little digging and you will likely figure out the source of money leaks. Here are some tips:

• Create and refer to your written spending plan—write out a spending plan each month and stick to it, which makes it easier to find and fix the leaks, and avoid them later on.
• Save and refer to your receipts—start saving your receipts (an old shoebox will work). Every time you purchase something, toss the slip in that shoebox. At the end of each month, go through them and determine which spending is necessary and which is not. As you do this each month, you’ll begin to see patterns. Chances are, you’ll find the non-important ones are the source of money leaks.

How to Fix Them
Finding your money leaks is just one side of the equation. You still need to get rid of them by actively taking control to prevent them.

• Put a limit on your “free spending” money—give yourself a fixed monthly amount of money to spend freely. Then, stick to that amount.
• Avoid the “money leak” places—you may find your money leaks are taking place at a specific store. Naturally, avoid the locations where your money leaks happen.

Make your budget a priority. Cut out the expenses you do not need and create space in your budget for the more significant spending that matters to you.