Saving money is not only about your income! Have you ever wondered why both many high-income earners and low-wage workers end up with a zero account balance?
In fact, many people adjust their standards of living according to their salary, i.e. pay raises are used to rent a more expensive apartment or to buy a nicer car. In case of unemployment, those high-income earners might look even more stupid, as they have to continue to pay their heavy bills.
This is why you should start keeping book over your household expenses. You will be amazed at what you find, especially when considering (monthly) subscriptions. For example, I chose a less expensive cell phone contract, switched to Spotify Student, cancelled my NFL Gamepass subscription and terminated my gym membership – without incurring a loss of utility. (To learn more about my own experience see here: What I changed after keeping book over my expenses.)
Let me outline how an overview of your household expenses could look like (to track them you can simply use Excel or you can choose from a vast number of apps, e.g. Wallet, Monefy, or Money Manager):
- Start with your monthly income streams
- Income from self-employment
- Then you should think about your monthly fixed costs
- Rent/Mortgage including heating etc.
- Electricity Bills
- Pay TV
- Streaming Services (Netflix, Disney+, Spotify, Apple Music, Hulu, Youtube-Premium, …)
- Telephone Bills (Fixed line and mobile phones)
- Insurances (car insurance, household insurance, liability insurance, …)
- Other Subcriptions
- Your fixed costs will probably make up a huge part of your monthly expenses, but you should also consider your variable costs
- Daily Life
- Hygiene Products
- Recreational Activities
- Theme Parks
- National Parks
- Car related expenses
- Car wash
- Other infrequent expenses
- Daily Life
Keeping book over your expenses will help optimizing your savings rate. Please let me know if you miss any category.