Living on a budget is one of the first and most important steps towards financial freedom. We all have different goals, from getting rid of debt or saving for retirement. Reaching those goals comes with having a financial plan. You should plan for how you spend your money each month and optimize it.
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Reviewing your budget regularly can give you an idea of how well you’re managing your money. You can see whether you need to cut spending in a particular area. Unnecessary fees, for example, can account for a significant chunk of your income each month if you’re not paying attention. If you’re having trouble making your budget work, try cutting out some of these unwanted expenses:
1. Convenience Fees
A convenience fee is an extra charge that certain businesses will tack on when you’re paying for goods or services. For example, some companies may charge a convenience fee when you pay your bill over the phone versus mailing it in or paying online. The idea is that the fees help the company to recoup any added expense they may incur during the transaction.
Convenience fees may be good for the business, but they’re only inconvenient when it comes to your budget. These fees typically run at just a few dollars. However, they can quickly add up if you’re getting hit with multiple convenience charges each month. For one, it may not seem like a big deal to hand over $5 a month to pay your phone bill each month. But when added up, that’s an extra $60 you could have at the end of the year.
2. Overdraft Fees
It happens to just about everyone. You write a check with the intention of transferring money over from your savings to cover. Then you get sidetracked and forget. Before you know it, your forgetfulness has earned you a $35 overdraft fee.
Despite federal rule changes that were designed to prevent abusive overdraft charges, these fees are still big business for banks. In 2012, overdraft fees generated $32 billion in revenue. If your bank account is regularly in the red, these fees could be putting you deeper into the hole.
You could opt in to your bank’s overdraft protection program. Be aware that there’s usually a fee that goes along with this service. Sometimes you can attach your checking account to a savings account to cover you. And you can always make an effort to pay more attention to your balance.
3. Account Maintenance Fees
Overdraft fees aren’t the only way banks make money. Account maintenance fees are another sneaky expense that could be eating a hole in your bottom line. Some banks, for example, charge you a fee if you don’t maintain a certain balance each month. Others may charge a fee if you write too many check or don’t make a certain number of transactions.
When opening a bank account, it pays to read over your account agreement carefully. That way you can see exactly what types of fees come with the account. Plenty of banks offer free checking accounts, but you should still read the fine print to look for hidden fees.
4. ATM Fees
Stopping by the ATM is easy, but it usually comes at a cost. Banks typically charge a service fee for non-customers who use their ATMs to make a withdrawal. There are even banks that charge their own customers a foreign ATM fee for getting money from a machine that doesn’t belong to the bank. Hitting the ATM two or three times a week can be convenient. But paying $4 or $5 each time basically throws your money away.
5. Credit Card Fees
Credit cards are a smart way to earn points or cash back on the things you buy. Except sometimes the cost of those rewards doesn’t make sense. If you pay an annual fee, transaction fees, balance transfer fees, over limit fees or late fees, those costs could outweigh the rewards.
Before you open a new credit card account make sure you get a breakdown of the fees that might come up. There are plenty of cards that don’t carry an annual fee but you may be able to earn better rewards with a card that does. If you’re considering getting a card with an annual fee, you should weigh it carefully against the amount of rewards you expect to earn to make sure it’s a good deal.
Fine-tuning your budget is an ongoing process that involves looking at the big picture and the smaller details. Eliminating these unnecessary fees is an easy way to free up some extra cash and keep your budget on track.
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