Not sure where to start after creating your budget? Part I will go line by line through determining whether these large expenses are providing value and ways to cut each one if they're not!

Part I – A Beginner’s Guide to Analyzing Your Budget

Not sure where to start after creating your budget? Part I will go line by line through determining whether these large expenses are providing value and ways to cut each one if they're not!

Especially if you’re new at budgeting, it can be difficult to really take the time to sit down and determine whether your spending aligns with your values. However, going through your budget line-by-line is an essential task if you are really serious about reducing your spending.

Those expenses that aren’t providing value should be eliminated and that money used instead to promote things that will increase your happiness, such as a vacation, or give you peace of mind, like an emergency savings account. You’ll find through doing this exercise that money is simply a tool to create a life that you love and provide you with freedom.

It’s so important to note that this exercise is not about trying to cut every single one of your expenses to a you-never-get-to-have-fun-again, bare-bones budget. It’s simply about determining ways to trim expenses that are not important to you.

Of course, in order to analyze your spending, you first have to track your spending. Whether you prefer to track with a spending journal, spreadsheet or software such as Mint or YNAB, it’s simply important to know the real totals and not just estimate them. It’s very likely that you think you are spending less than you are actually spending. I know it was true for me!

The best way to analyze your budget is to question every single thing that you are spending money on. I’ve provided many questions that you should ask yourself in each category below as well as some examples of ways to cut expenses in that area.

It makes the most sense to start with your largest expenses, where there is often the greatest opportunity for reducing spending and go through each budget line item. Note that I’m following the order that I’ve presented on the budget spreadsheet provided in class PF104: Creating a Budget & Cash Flow Statement, which happen to be roughly in that order.


There’s not a lot you can do about decreasing how much you’re paying for certain types of taxes such as federal, state and FICA taxes. However, there are a few opportunities out there.

Ask yourself the following questions about your current tax situation:

  • How concerned are you about implementing tax minimization strategies?
  • Are you willing to spend the time to learn more about taxes in order to potentially reduce your tax liability?

A few suggestions for reducing your tax liability include:

  • Contribute more money to qualified retirement accounts and IRA’s to decrease taxable income
  • Contribute to an HSA account if you are eligible to decrease both FICA and income taxes
  • Keep good documentation of itemized deductions, such as charitable contributions to ensure that you deduct your full eligible amount
  • Analyze your W-4 withholdings to determine if you should increase the number of allowances you are claiming (possibly giving yourself more money each month, but reducing your refund the following year)
  • Project your taxes throughout the year to see if there are any opportunities for tax minimization


Housing expenses are likely your largest expense and provide one of the greatest opportunities for saving money. We all need a roof over our head, but paying more than 20-25% of your gross income on housing will make it very hard for you to get ahead financially.

Ask yourself the following questions about your housing needs in determining whether your current housing expenses are in line with your values:

  • What are your priorities and needs when it comes to housing (size of the home, quality of public schools, etc)?
  • Does it make more sense for you to own or rent a home?
  • Do your current homeowner’s insurance deductibles and limits make sense with your current financial situation?

Some suggestions for cutting housing expenses include:

  • Refinance your mortgage if interest rates have lowered
  • Consider downsizing your home if you have more space than you need
  • If you are considering purchasing a home in the near future, make sure that you know the impact of it on your budget and minimize the cost
  • Pay 20% down on a home purchase to avoid having to pay for PMI (private mortgage insurance)
  • Choose to live in less upscale neighborhoods so you avoid trying to keep up with the Jones’
  • Look for less expensive places to rent when your current lease has expired
  • Consider having roommates to help with rent/mortgage costs and utilities
  • Consider moving to a different area with a lower cost of living
  • Shop around for lower rates on homeowner’s insurance
  • Increase your homeowner’s insurance deductible if you have emergency fund savings to cover the increased amount


I’ve seen so many great ideas out there for reducing utility costs. This is honestly only recently something that has been on my radar, but I’ve found that creating simple habits like turning off lights and unplugging unused appliances has made a huge difference in my utility bills.

Ask yourself the following questions about your utility needs to determine your values:

  • How important is it to you that your home be very cool in the summer and very warm in the winter?
  • How important are cable, fast internet, and a large amount of cell phone data to you?
  • How much extra effort are you willing to put in to decrease your utility costs?

Some suggestions for cutting utility costs include:

  • Unplug appliances when not in use
  • Replace traditional bulbs with LED bulbs
  • Install and utilize a programmable thermostat
  • Caulk and seal your home to lower air conditioning or heating costs
  • Change furnace filters regularly
  • Adjust your water heater setting to a lower temperature (for safety purposes as well!)
  • Cancel cable and use an antenna and/or subscription services like Sling, Netflix and Amazon Video instead
  • Shop around for a less expensive cell phone network or downgrade your current plan


Okay guys, I get it…you like cars. And honestly, I like cars too! My husband is an automotive engineer and we live in the suburbs of Detroit. Enough said, right? However, insisting on driving around brand new cars and upgrading them often probably doesn’t make sense unless you are wealthy enough to pay cash for them. We personally purchased a certified used vehicle and do not have an auto loan. We’ve only had minor maintenance costs and that money that we’ve saved by not having to make car payments goes all to our kids’ college savings accounts.

Ask yourself the following questions about your transportation needs in determining whether your current transportation expenses are in line with your values:

  • What are important features that you need when you buy a car (all-wheel drive, enough seats for multiple kids, etc.)?
  • How much do you drive every month?
  • How many cars does your household really need?
  • Do your current auto insurance deductibles and limits make sense with your current financial situation?

Some suggestions for cutting transportation expenses include:

  • Purchase cars used (consider certified used!) instead of brand new and avoid leasing
  • Consider trading in or selling your car for something less expensive or more fuel efficient
  • Perform regular maintenance on your cars to ensure that they stay in good working order
  • Shop around for repair costs when needed
  • Walk or bike when you can instead of driving
  • Group errands together to save money on gas
  • Shop around for lower rates on auto insurance
  • Increase your auto insurance deductible if you have emergency savings to cover the increased amount

Debt Payments

I’m sure that we can all agree that debt payments are one expense that provides no current value. Perhaps the things that you spent money on in the past provided value to you, but debt currently isn’t providing you with any value right now!

Ask yourself the following questions to determine your current values:

  • How important is it to you to get out of debt?
  • How hard are you willing to work to reduce your debt?

Some suggestions for cutting debt-related expenses include:

  • Negotiate your interest rates with your creditors
  • Meet with a reputable credit help agency if needed
  • Avoid credit cards altogether if they’re a problem for you
  • Create a debt snowball or debt avalanche plan
  • Use a visual debt tracker to keep motivated on paying down debt
  • Consolidate student loan debt to lower payments & interest rates


Food is an absolute necessity, but the good thing about cutting your food expenses is that it could also be beneficial for your health as well. There is definitely a balance, though, as it can cost more to buy organic and higher quality food.

Ask yourself the following questions to determine whether your current spending on food is in line with your values:

  • What are your priorities related to buying food (organic, all-natural, etc.)?
  • How many times a week (or month) do you feel is reasonable to eat out?

Some suggestions for cutting food expenses include:

  • Create a weekly or monthly menu plan
  • Make a grocery list to bring when you go grocery shopping to make sure you don’t purchase unnecessary items
  • Use low-cost staples such as rice and beans to stretch your grocery budget
  • Use coupons and/or money saving apps to reduce your grocery bill
  • Purchase multiple items that you regularly use when they’re on sale or in bulk
  • Batch prepare dinners in advance and freeze them to save time and money
  • Limit your eating out
  • Check websites for discounts on restaurants where you regularly like to eat

Final Thoughts

The thought of tackling all of these expenses at once can be incredibly overwhelming. Choose one area that you think will have the greatest impact on your budget at a time and you’ll be amazed at the difference it will make.

Click here for Part II of analyzing your budget by covering the smaller expenses.


8 Responses

  1. I think the hardest part of budgeting is simply getting started. Many of us get too overwhelmed and lose focus when we see large numbers. I have a friend that wants to start a budget but is too intimidated by budgeting and learning the basics of personal finance!

    1. So true! I do believe that there are different budgeting styles that work best for different people. I’m certainly a Type A spreadsheet person, but I can see how others may be more successful with an 80/20 budget or something in between. Getting started is the hard part for sure!

  2. I know when I first started out it was overwhelming to put everything pen to paper but over time it obviously became an easier exercise. Right now one of the things I’m struggling with is if we should get rid of cable. I don’t watch as much TV as I once did but it’s still nice to catch up on some of the shoes that I enjoy. So we’ll see what we end up doing but it’s definitely an expense on the chopping block.

    1. Haha-You know the correct answer in the personal finance world is yes, you should get rid of cable! DC @ Young Adult Money just wrote a great post about getting rid of cable and some alternatives if you haven’t yet seen it. My husband added cable recently (he was told it would only be $10 more than our current internet package and he’d get sports channels) and it ended up that the salesperson was not honest with him. I tried to negotiate (Comcast/Xfinity, blah!) and didn’t get anywhere until I read DC’s post and picked up some tips. However, I think the right answer for real on the cable is if it’s something you enjoy and use and are willing to spend the money on versus spending/saving it for something else it’s an expense worth keeping. 🙂

  3. I found the hardest part of budgeting and doing a spending audit was the mental reluctance to want to “flip the rock over” and look what was really underneath my money decisions.

    The most difficult thing was taking that first step but once you’ve made the commitment and can identify your goals along with the pain points that are holding you back, the sky is the limit if you’re engaged and willing.

    This post includes some really helpful steps and lays it out in an easy to action, tactical manner.

    PS – I realize this is a year after the post but just saw your Twitter share.

    -Scott at Making Momentum

    1. I’m glad you stopped by Scott! I agree, it’s the goals that really make the difference in committing to do all this extra work to manage your money and your spending. It gets easier just like changing any other habit.



I’m Kathryn Hanna-wife, mother of 3 and a Certified Public Accountant. I love to budget (really, I do!) , build spreadsheets and spend money on travel, sewing supplies and good chocolate.


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