Your Personal Finance Makeover

At least once per year, it's smart to do a personal finance makeover.

By using tools like Mint, you can track how much you are spending in different categories each month. The question you should be answering: Do your spending habits align with things that really matter to you? Then you can create a monthly budget that more closely aligns with things that are important to you (for example, start a monthly savings goal for taking vacations).

I did a self-assessment recently and found that several of my spending habits didn't align with what matters most to me. It is surprising how quickly poor spending habits add up.

Eating out every day: I was spending $10-12 a day on lunch. To reduce my lunch spending to $5 a day, I bring my lunch a few times a week. Other days, I go to pay-by-the-pound cafeterias. I can get full on just $5 for a salad by not picking the items that are heavy or filled with water. I also still go out to eat with coworkers, just not as often.

Total savings: $1,200 per year

Joining a wine club: I joined a wine club membership without realizing how much I would be spending per bottle. While the wine was good, the price per bottle put me over my wine budget. And there were only a few bottles in each shipment that I really liked, so it wasn't difficult to stop being a member of the club.

Total savings: $1,000 per year

Web hosting: I was paying $50 a month for my own virtual private server at ServInt. By switching to BlueHost, I cut my bill by 10x!

Total savings: $540 per year

Monthly bank fees: I had a business account with Bank of America that was below their account minimum. This was costing me $16 a month. I got the charge removed several times by visiting a local office, but in order to remove it for good, I closed the account.

Total savings: $192 per year

Cell phone plan: I am paying $90 a month for a Verizon plan with an iPhone. After my contract ends, I will be switching to T Mobile's $30 no-contract unlimited data plan in combination with Google Voice. See this Wired article for full details of how to do this. The only caveat is that you need to purchase a phone beforehand, which can be expensive unless you get it used.

Total savings: $720 per year

Other saving money tips:

  • Read Personal Finance for Dummies and other personal finance books / blogs.
  • Order common household, hygiene and food products in bulk at Costco or Amazon. Amazon has an option to order an item as a subscription and save 5%. You can then cancel the subscription immediately. In fact, if you do six subscriptions within a month, you save 15% (and still have the option to cancel each subscription after shipment).
  • Save thousands of dollars in taxes each year by investing the max you can Live in a city or near public transportation? Save hundreds in taxes if your company allows you to join a Commuter Benefits program, where your commute to work is deducted pre-tax.

In conclusion, it's a good idea to do a personal finance makeover at least once a year. Identify spending habits that don't align with what's important to you, and make positive changes. Every habit that you change now will have a compounding effect on the years to come.

Derek Ralston is the author of Money and Happiness and Modern Moonlighting. He has been writing about personal growth and personal finance on his blog since 2008. For more information about Derek, visit his website at