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

Hopefully, you’ve had a chance to look at your large budget items in Part I of the Guide and brainstorm some ways to cut out some of your expenses that are not benefiting you. As much of an impact as it will make for you to reduce those large items, don’t forget that small things matter too!

After all, it’s commonly those small, regular expenses that are easy to justify, but they are often significant in total. This is commonly referred to as the latte factor in personal finance, but whatever you want to call it…it’s wasting money when these little spending items aren’t helping you. In your own personal situation, a latte might provide a lot of value to you, but you may have a number of subscriptions that you don’t actually use but are automatically renewed year after year. Remember, we’re not looking to cut out all expenses, just simply to minimize the ones that aren’t providing value in your life.

In your own personal situation, a latte might provide a lot of value to you, but instead, you may have a number of subscriptions that you don’t actually use but are automatically renewed year after year or month after month (ahem, hopefully not your gym membership already!). Remember, we’re not looking to cut out all expenses, just simply to minimize the ones that aren’t providing value in your life.

Let’s take a look at how we can analyze some of these expenses and see where we can prioritize to increase our budget’s bottom line.


I suppose I’m being optimistic when I am counting medical expenses as one of the “smaller” expenses in your budget. For many people, health insurance is taken out of their paycheck, which was included under salaries & wages in the budget, so here we are talking about mostly doctor appointments and prescriptions.

For others, this may be an extremely significant expense. And unfortunately, this is likely one area of your budget that you may have the least control over.

Ask yourself the following questions about your current medical expenses:

  • Is it a possibility for you to reduce your medical expenses based on our current health?
  • Are you willing to look at unique ways to reduce your medical expenses?

A few suggestions for reducing your medical expenses include:

  • Consider using a healthcare ministry as an alternative to health insurance if you are not eligible for health insurance through your employer
  • Shop around for medical services using a website such as Castlight, which shows fees for procedures at different facilities
  • Fund and use your HSA or FSA to pay for medical expenses on a pre-tax basis
  • Get your annual physical (which is 100% covered by your health insurance) and other preventative care
  • Spend money on healthy food and exercise regularly
  • Buy generic prescriptions and/or use a bulk mail service to lower the cost of prescriptions
  • Use a website such as to get coupons for prescriptions and research the lowest cost pharmacy in your area


The expense items we’ll cover in the personal category include clothing, subscriptions, services, recreation and entertainment, and hobbies. This is going to be a BIG one that you may find the most difficult to cut! This is where you’re going to need to take an objective look at your priorities and determine whether your money would be better spent (or saved) elsewhere.

Ask yourself the following questions about your regular personal expenses:

  • How important is it to you that have the latest fashion in clothing?
  • Do you know what annual or monthly subscriptions you have and do you actually use all of them?
  • How often do you need to get your hair cut, nails done, pedicures, etc. and would you be able to do some of these yourself?
  • Are you familiar with community events in your area?
  • How many hobbies do you have and which ones do you regularly participate in consistently?

Some suggestions for reducing your personal expenses include:

  • Purchase fewer, higher quality clothing items that you will wear often and that can be coordinated (bonus for purchasing out of season to save even more!)
  • Shop for kids clothing at thrift or consignment shops, since they grow out of clothing so quickly
  • Learn to do your own manicures, pedicures and even to cut your children’s hair
  • Utilize loyalty & reward programs at stores your frequent and check the store websites or Groupon for discounts
  • Make online purchases through Ebates, Topcashback or Upromise to earn cash back rewards
  • Track your expenses to identify subscriptions being charged to you that you no longer use
  • Research free or low-cost community events going on in your area
  • Use the library to borrow books, audiobooks, movies and magazines
  • Rent instead of buy hobby equipment if you frequently switch hobbies (that’s a note for my husband, wink wink)


The miscellaneous expenses we’ll cover in this section include childcare, gifts, household supplies, pets and bank fees. Each one of these expenses is arguably a variable expense that could be cut out almost entirely, excepting childcare (which could be debated I suppose).

The variable nature provides a good opportunity to really determine how much is appropriate for spending in each of these categories.

Ask yourself the following questions about your miscellaneous expenses:

  • Are you open to reducing your childcare expenses?
  • What do you think is a reasonable amount to pay for gifts for each person in your house for birthdays and other milestones?
  • Is your financial process organized to avoid paying unnecessary bank and credit card fees?

A few suggestions for reducing your miscellaneous expenses include:

  • Swap childcare with another person to minimize the cost, or research other less expensive alternatives
  • Make a budget or set a limit for how much you will pay for birthday and anniversary gifts
  • Buy household supplies in bulk or on sale to minimize cost
  • Ensure that your pet stays healthy through high-quality food, exercise, and staying current on their vaccinations to avoid veterinary costs
  • Implement an organized process for your finances to avoid paying overdraft and late bank fees

Non-Recurring Expenses

Who wants to cut out holiday and travel expenses? No one! However, these are two large-ticket items that can really break a budget and make people give up budgeting altogether. Don’t do this – just take a good look at what you can do to still have fun, but do so without going into debt.

Ask yourself the following questions about your holiday and travel spending:

  • What are the important holiday traditions you have that you want to keep?
  • How many times a year do you usually take a vacation/travel?

A few suggestions for reducing your holiday and travel expenses include:

  • Set a holiday spending plan with a list of people that you will buy gifts for and stick to it
  • Entertain for the holidays at home
  • Minimize the number of holiday parties that you attend
  • Use travel reward credit cards to earn points toward travel (if you use credit cards responsibly)
  • Save money on airfare by being flexible with times, researching on different days and joining frequent flyer programs
  • Save money on hotels by traveling off-season, using reward programs and looking into alternatives such as Airbnb
  • Save money on food by bringing/making some of the food yourself (sandwiches, etc.)
  • Consider alternative, less expensive vacations such as camping or going on a road trip

Final Thoughts

After all of that, it’s worth the reminder that budgeting isn’t about cutting out as much as possible. It’s about prioritizing a limited resource to allocate it to the most essential things. With far too many people living paycheck-to-paycheck (even 25% of 6-figure earners!), this is an important exercise in figuring out how to use your money to build a life that you love.

Are there any other suggestions you want to share for how you analyze your budget or reduce your expenses?



3 Responses

  1. Wow! There are sooooo many good suggestions here I don’t know where to begin. Since medical is once that’s sorta like a necessity, “Buy generic prescriptions” – this one I started years ago and the difference is a lot. PLUS we a have a grocery card that we use to buy stuff and the store brands usually have a discount so we save more by purchasing those generic ones for cough syrup, Ibuprofen, other common over the counter medications. Oh and gas points too!

    1. I’m glad it’s useful! I didn’t even think about the perks you get for filling prescriptions and using store loyalty cards. I have one that accumulates gas points as well. In addition, there are often $10/$20 coupons on the store loyalty cards if you transfer an existing prescription or fill a new prescription with them. Great idea!



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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