4 Steps to Track Your Recurring Expenses
Hearing that familiar alarm ring from your iPhone in the morning, scrolling to check your daily notifications and replying to friends on Whatsapp. These seemingly mediocre tasks done daily are also ones that unknowingly constitute a part of your expenses.
The concept of expenses was explained in the first article here and in the upcoming articles, I would be diving into specific expenses and sharing more about them.
One area that you can look into when minimising expenses can be recurring expenses.
List
To completely list daily and recurring expenses that one can incur would be impossible but I would summarise to the best of my abilities. These include utilities (i.e. electricity, gas, water, mobile bills), food, transportation, and other seemingly “one-off” expense like purchasing a new phone.
Rank
After creating a list of your recurring expenses, you can start ranking them based on importance, from most to least. Taking reference from Maslow’s Hierarchy of Needs, the lower hierarchy needs have to be more or less satisfied before attending to needs higher on the hierarchy.
Therefore using a scale from 1–5, 1 being the most important and 5 being the least, one example could be: Utility bill (1), Netflix subscription (4), ride-hailing (4), public transport (2).
Classify
By coming up with a list and ranking the expenses hopefully, you have classified the expenses into two main categories: needs and wants. To some, paying internet bills is a necessity whereas paying for a Netflix or Spotify subscription may be a luxury.
However, I would like to caveat in this example that everyone’s needs and wants are different depending on their income level.
Budget
Budgeting a percentage of your income every month to spend on these recurring expenses can be a way to monitor your spending.
In Robert Kiyosaki books Rich Dad Poor Dad, he advocates saving first then spending. For example, if your monthly spending is similar to the pie chart below, you can decide to save 60% of your income first at the start of the month, before spending the rest of the 40%.
Personal Experience
Practically I would like to share with you how I go about budgeting for the future.
I would have 2 different bank accounts: one for spending labelled Expenses and the other for saving.
After which, I would transfer roughly 50% of my income at the start of the month to my savings account. The rest of the 50% would be left in the Expenses account. Then I would be free to spend from the Expenses account, first paying off my utility bills followed by spending on daily necessities like food and beverage.
Periodically, every month, I would download the bank statement for the Expenses account and analyse the transactions. Over the year, these transactions are accumulated and at the end of the year, the type of transactions and the amount spent can be tracked. It would also provide a birds-eye view of big-ticket items you might be spending on in certain months.
To sum it off, you can minimise these recurring expenses through listing, ranking, classifying and budgeting. After which you can track these expenses and adjust your budget based on your own goals and preference.
Disclaimer: Content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.
