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Slash Spending AND Keep The Fun Stuff

Find extra cash you can use to aggressively pay back debt or build up your savings cushion.

by Rob Bertman, CFA, CFP® in Spending
July 26, 2016

Summary

Ever wonder what it would feel like if you were to look back at your credit card or debit card statement and actually be excited to see where your money went and where you spent your money?

I developed a framework that’s going to help you get there. It’s going to help you preserve the things in life that you enjoy spending money on and also cut your overall spending at the same time.

Most people have been taught to categorize spending by WHERE we spend it (housing, food, travel, going out with our friends, etc) and it doesn’t tell us if it helped us live a more enjoyable, fulfilled life today.

The Keep, Cut Back, Eliminate Framework is a way to categorize our spending based upon the life fulfillment you get out of spending your money. Here are the categories:

KEEP: Spending that gives us great life fulfillment, enjoyment and reduces stress not only in the moment, but even 30 days later. Spending on necessities and also anything that could increase our income are also included in this category. The goal is to maintain spending on these things.

CUT BACK: This is our first place to cut spending. The cuts come from either doing something less often or finding a way to get the same experience but for less money. For example, ordering one less course or one less drink when we go out with our friends and maintaining the same experience.

ELIMINATE: The majority of savings will come from this category. These are the things that we spend money on that make us feel guilty or regretful They did nothing at all to help us enjoy life or reduce our stress.

Time to get results: Here’s an exercise that will help you slash your spending and still enjoy your life.

  1. Pull up your last bank account or credit card statement and look through the individual transactions.
  1. Make note of the things that put a smile on your face. Those items belong in the KEEP category. Circle them or highlight them in green.
  1. Cross off or highlight in red the things that you regret or feel guilty about spending in retrospect. These are the things that we’re going to outright ELIMINATE from your spending.

Note: It’s not for anyone else to decide what money well-spent means to you.  How do YOU feel about it?  This is not about your friends, parents or anyone else. This is about how YOU feel about it.

When people go through this exercise, even in one month, they find hundreds of dollars or even thousands of dollars depending on their level of spending.

So, take the 10 minutes to do this exercise and find hundreds of dollars of spending that you don’t even need to spend and still preserve the life you enjoy today.

I want to hear about your results!

Feel free to reach out to me at rob@moneywithimpact.com.

You can also find me at www.moneywithimpact.com, or subscribe to the 5 Minute Financial Fitness podcast on iTunes, Android or Stitcher and leave a review.

Thanks!

Rob Bertman, CFA, CFP®
Founder & CEO
Money With Impact
www.moneywithimpact.com

Transcript

Ever wonder what it would feel like if you were to look back at your credit card or debit card statement and actually be excited to see where your money went and where you spent your money?

Well, I developed a framework that’s going to help you get there. It’s going to help you preserve the things in life that you enjoy spending money on and also cut your overall spending at the same time.

Hi, I’m Rob Bertman, Founder of Money With Impact and this is 5 Minute Financial Fitness where we get your money in shape in 5 minutes by giving you a great tool, tactic or strategy that will help you improve your financial situation. We do it in a way that’s easy for you to understand, and we do it in 5 minutes.

6 years ago, my first son was born and my wife and I were wondering how we can preserve the enjoyment we get out of life today but do it with less time and less money.  Kids are very enjoyable but they’re also very expensive. We have daycare costs, diapers, and things like that. We also have extra saving to do to make sure we can get there for our son’s future.

So how do we get there with less time and less money?

Now a lot of people when we think about spending, we categorize it like here’s how much we spend on our housing situation, here’s how much we spend on food, here’s how much we spend on travel, here’s how much we spend going out with our friends.

The problem with that is that it doesn’t give us any context to what that spending actually did for us. How it helped fulfill us, how it helped us live a better life and the life that we want to live today.

With the Keep, Cut Back, Eliminate Framework, it’s a way to categorize our spending based upon how you enjoy life and the fulfillment you get out of spending your money.

Let’s start with the KEEP category: These are the things we spend money on that we either need to spend money on to live or that we want to keep spending money on because it gives us great life fulfillment and enjoyment. Or maybe they help us grow and build our income. Now, these are things that make us feel fulfilled or reduce our stress not only in the moment, but in retrospect too, even 30-90 days later. It still made us feel great about it.

Now the CUT BACK category is where we’re going to start to find ways to save money.  Because, we don’t want to save money on the things we put in the KEEP category. The CUT BACK category is a way to find savings by either doing something less often or doing it in a way that we can get the same experience but for less money. The example I always like to point to is let’s say that we’re going out to dinner or drinks with our friends. Maybe there’s a way to order one less course or one less drink but still preserve the experience of hanging out with our friends. That would be something we could cut back on there.

Now the ELIMINATE category is where the majority of savings will come from. These are the things that when we look back in retrospect, they made us feel guilty or regret that we spent money there or at the very least we’re just apathetic. They did nothing at all to help us enjoy life or reduce our stress. These are the things that we just want to straight out cut out of our lives all together.

So what we’re going to find as we go through this exercise is that we’re going to be able to preserve and identify the things that we truly enjoy spending money on and that reduce our stress. We’re going to find ways to cut back spending but still have the same experience, and we’re going to find out where to eliminate spending all together.

What’s going to happen in the end is that we’re going to have all the things we want to spend money on, but we’re going to be spending less money overall. This is exactly what my wife and I did 6 years ago, and we do this regularly to make sure that we keep pruning our spending just like a tree or a garden so that it grows in the right direction.

Now the exercise I want you to do is to pull up your last statement whether it’s your bank account or credit card and look through your individual transactions. As you go through, make note of the things that put a smile on your face. Those are the things we want to keep spending money on.

Notice in retrospect that even though it’s been 30 days or so since you spent money on it, it still brings a smile to your face. That’s money well-spent. It’s not for anyone else to decide what money well-spent means to you.  How do YOU feel about it?  This is not about me or your parents or anyone else. This is about how YOU feel about it.

Circle or highlight in green the transactions that you want to keep spending money on (the things that make you smile or reduced your stress).

Then go through and cross off or highlight in red the things that you regret or feel guilty about spending in retrospect.  These are the things that we’re going to outright cut from your spending.

At the end of the day, you’re going to be able to preserve spending money on the things that you enjoy and you’re also going to be spending less money overall.

When people go through this exercise, even in one month, they find hundreds of dollars or even thousands of dollars depending on their level of spending.

Go ahead and take the 10 minutes to do this exercise and find hundreds of dollars of spending that you don’t even need to spend and still preserve the life you enjoy today.

Thanks for taking the time to be with me. Go through this exercise. I want to see you get results!

Feel free to reach out to me at rob@moneywithimpact.com and let me know other topics you’d like me to cover.

You can also find me at www.moneywithimpact.com, or subscribe to the 5 Minute Financial Fitness podcast on iTunes, Android or Stitcher and leave a review.

Talk to you next week!

Rob Bertman, CFA, CFP®
Founder & CEO
Money With Impact
www.moneywithimpact.com