By Skyler Kraemer MS, CFP®
Client Advisor
Reducing the amount of money you spend is essential in times like these. Knowing that this is not an easy thing to do, I’ve provided some exercises on how to manage your expenses in a reasonable way.
This article begins with some exercises that can help to manage your day to day expenditure, and then provides detailed action-items for understanding your financial situation and designing a plan to improve your financial position.
Exercises for Managing Expenditure
Exercise #1 – Needs vs. Wants
Step 1 – On a piece of paper write 
down your own definition of a spending need vs. a spending want.
Step 2 – Choose a month and print out all of the monthly statements for all credit cards and checking/savings accounts that are being used for your households spending.
If this part (printing statements) alone is challenging, you should consider finding ways to consolidate spending to as few accounts as possible. This will go a long way in making spending easier to keep track of in the future.
Step 3 – Take two different colored highlighters and highlight every transaction in the statements. Use one color for needs and the other color for wants.
Step 4 – Add up the total to determine how much you spent on needs vs. wants during that time period.
I would recommend during this for a “normal” month like January 2020 (pre-COVID) and also for a post-COVID month like March.
Exercise #2 – Identify Behaviors to Reduce Spending
Spending less is a goal. Goals are 
things that you cannot do right at this very moment. Behaviors are things that you can do at this very moment and are the way we achieve goals. If my goal is to lose ten pounds, there is nothing I can do right at this moment to make that happen. But a behavior I can do is right now is to go for a five mile hike. If I do that behavior (and others) over and over again, it will eventually help me achieve my goal. In order to achieve the goal of spending less, it’s critical that you identify the behaviors that will help you get there over time.
On a side-ways piece of paper, in the middle of the page, write the goal “SPEND LESS” and circle it. Around that circle draw lines to other circles and in those circles write down the behaviors that will help you achieve that goal. These will be things like “cancel Netflix” or “mow the lawn” which I think you said you’re already doing. It’s OK to write things that you’ve already done and just need to keep doing.
Try to write down as many behaviors as you possibly can. Your goal should be no less than 20 each but if you identify 30+ that would be great.
Take a look at the results and ask yourselves these questions:
- Are there things that you both wrote down?
- Are there things that one of you wrote down but the other didn’t?
- Are there things that you wrote down, but you still don’t want to do because it’s important to you and adds too much to your life?
- Are there things that you’ve already done and just need to keep doing?
- What is the easier thing to do on this list? What is the hardest?
- What will have the biggest impact on reducing spending? What will have the least impact?
- Is the hardest thing also going to have the biggest impact?
The final step is to begin executing on these behaviors, which may be easier said than done. I recommend starting small. You can choose 2-3 items each and either do them or try to get in the habit of doing them this week. Then you can choose 2-3 more next week. Don’t let the size of the list of behaviors get in your way but be aware that to make a meaningful impact on your spending, you are going to have to make a meaningful change to your behavior.
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