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That's FijiAirways.com. From here to happy. Flying direct with Fiji Airways. Today on Radical Personal Finance, we continue with very practical advice on how to adjust your record keeping to actually help you figure out how to save money on the categories that matter most to you this year. Welcome to Radical Personal Finance, the show dedicated to providing you with the knowledge, skills, insight, and encouragement you need to live a rich and meaningful life now while building a plan for financial freedom in 10 years or less.

My name is Joshua and I am your host. I think, I think, I think, I think, I think this will be the last one in this series wherein I try to get your new year started off right by giving you the tools that you can use and implement into your budget to save you some serious money.

As always, there are multiple areas in which we need to focus on finances. We need to focus on increasing income and there's a lot of things that we can do there and working and finishing up this course that I'm doing on how to increase your income for those who purchased the beta version.

We can decrease your expenses and usually decreasing expenses for most people is the fastest way to make progress. You can invest wisely. It's very, very important but usually takes a huge amount of time. You can avoid catastrophe and you can optimize your lifestyle. All of those are the basic components and building blocks of how we approach finance and that's what we do each and every day.

However, today, for the last couple of weeks as we started the new year, I've been working on helping you to save money in your budget and I've been using the example from my own budget of me cutting back on grocery expenses and food expenses as a way of helping you with some practical tips around food and grocery expenses but also as a way of teaching you some skills that you can apply to other areas of your budget.

My hope is that even if your grocery budget is well on track that you've been able to use some of these ideas and apply them to other areas. So I have at least this one more in this series and then we'll maybe move on to other topics but I wanted to really focus in on helping you save money as we begin the new year.

If your life is anything like mine, you have some good habits, you have some good practices that you put in place but when at the end of the year, you look back on a whole calendar year, I get a little frustrated at how much money I spent and so it's nice to use that energy and that frustration for me frankly.

It's nice to use that frustration and the energy from it to make some changes that will save me some money so that in January of next year, I'll be sitting here looking back and a little bit happier. I can compare year to year and see the progress that we're making.

For me, probably groceries and again, I'm using this as an example. There are other areas as well but groceries is one of those things where as my family grows, so does our grocery bill. And so what was well squared away with a few years ago now needs additional work.

Today, I want to talk about the importance of budget categories. Now, if you haven't heard it, I would recommend you go back and listen to episode 408 from January of last year wherein I discussed budget categories for the new year that actually matter. Again, episode 408, budget categories for the new year that actually matter and the point of that show and the point of that content is to look at your budget categories in a practical way in your financial tracking system, whatever that is, whether it's a piece of paper and you write things down, whether it's Mint.com, whether it's YNAB, radicalpersonalfinance.com/ynab for a free trial, whether it's personal capital, use the personal capital link on the website.

I think it's radicalpersonalfinance.com/personalcapital. Whatever system is that you use, you need to have categories that are useful for you. Maybe you use something that's on your bank. And most people start with generic categories, the idea of, "Well, this is food or this is fuel or this is rent," and those things are useful.

But the whole point of tracking your money is so that you can make progress with your money. We don't just budget because it's fun. We don't just track our money because it's fun. We track it because it's useful and for some of us, it's fun. Better to have a hobby of tracking your money and figuring out ways to save money sometimes than some other things that you can do.

But we do it because it's useful so we can actually use the data. Well, in order for you to use the data, you've got to articulate it and put it into a way that makes sense for you. So in episode 408, I talked about how you should have some budget categories that are the ones that you want to minimize, pure costs, things that don't bring you joy and benefit to your life.

There are some categories that you want to moderate, things that are important to you, things that are expenditures that perhaps you don't strictly have to make. You wouldn't make them in an emergency situation but they're things that add measurably to your quality of life. They're things that add measurably to your achievement of your goals.

They're things that add measurably to the joie de vivre that you actually experience. Those may be the kind of things that you want to make sure are included in your budget but you don't want to let them get out of hand. You may enjoy fine food and so for you, it's very important to on occasion buy really fancy food and make a really special meal to enjoy with your friends or to buy a really nice wine or to go out into a nice dinner on occasion.

Well, those are the kinds of things that can add measurably if that's your deal, that can add measurably to your quality of life. But if you do it every day, then it could get out of hand and it could actually diminish the enjoyment of the experience, things that are special.

If you have them too much, become less special. There was a friend of mine who used to live in Cape Town, South Africa where lobster was cheap said, "To me," he said, "if you eat lobster all the time, it starts to taste like soap." Just about anything, if you do it in excess, it loses that sense of excitement.

Then there are certain budget categories that you may choose to maximize and you may say, these things are important. A simple example would be savings. It's very important that anything that you do that's savings is differentiated from other areas of your budget because you want to maximize your savings and there are certain things that perhaps are expenses in some cases but are savings in another.

Simple two examples from that show and I'm not going to rehash the whole show. I want to get to the point of today's show. But two simple examples would be I always separate out my purchase of assets from my purchase of just simple expenses. So when I buy something, I buy a pickup truck as I did recently, then I sit and I categorize that as an asset purchase.

The reason is that when I buy an asset, I'm paying cash for it. So I'm writing a huge check for – or handing over stacks of $100 bills to somebody is the way that I buy vehicles. Then I hand over stacks of $100 bills. That's a giant outflow from my life.

But I'm doing my very best when I buy a thing to buy something that's going to have a very low amount of depreciation. So I need a mental separation in my own life of what to do. So as an example, I recently – let's just use this pickup truck that I recently bought and I will share more about this in a forthcoming episode about our plans for 2018.

But I bought a diesel pickup truck. Now a diesel pickup truck of the kind that I bought is not inexpensive. It's pretty expensive. Diesel pickup trucks are very expensive right now. I very carefully thought through my purchase and my categorization and whatnot about how I was going to do it.

But I paid probably at least $4,000 to $5,000 more to have a diesel pickup truck than what I could have paid to have something that was a gas pickup truck. But on the flip side, I also am fully aware that for my application, towing a trailer significantly, which are our plans for 2018, I decided after making a mistake with the gas engine vehicle, I decided to go ahead and move to a diesel pickup truck to have a more pleasurable towing experience.

And secondarily, I know that that diesel pickup truck holds its value. There's good resale value. And so I'm consciously making a choice to spend more capital and putting it into an asset that will probably – if things work out, it will probably depreciate less than certain other choices I could make.

So that big cash outflow from my budget is not necessarily a pure expense. And you may do this with other areas in your budget. This is why it's so important to separate things out. You might say, "I'm not going to go down to Ikea and buy the cheap bookcase that will last me for three years.

What I'm actually going to do is I'm going to go to an antique store and buy something more expensive," but that by choosing carefully the quality of the antique and the name brand, it's something that will not lose value. But you're going to spend triple or quadruple the cash out of your pocket, but you're doing it in a way that's an asset expenditure.

That's the type of thing that needs to be clearly differentiated. Is this an asset expenditure or is this a consumption item? The Ikea bookshelf that you buy will be very cheap to buy, but it will quickly depreciate to a value of zero. There's not a big market for it in the resale world, in the secondary market.

The antique bookcase that you buy or the antique four-poster bed that you choose to furnish your house with may be very expensive to buy relative to the Ikea version, but perhaps its actual terminal value stays consistent and/or goes up. So I like to separate those things into the category of what I just use as asset expenditures.

Then of course I track all of the expenses that are associated with that asset. That separation in your tracking system is very valuable to put your head in a different space. Now of course if you're going to buy an asset, you want to get the best deal possible. But you don't want to mess yourself up and say, "Well, I'm scrimping and saving over here on tortilla chips by trying to find the cheapest tortilla chips and that makes an impact of $3 on my annual spending budget.

Meanwhile over here I'm going to buy this expensive thing, so I'm just going to blow my budget. What's the point?" If you have that philosophy and that attitude, then they quickly – everything falls apart and they wind up spending more than they have. So I'll skip the second example for now.

Go back and listen to episode 408 for more information on that. But today I want to talk about the granularity of your spending categories. The whole point of tracking your money is to help you make better decisions. So you need to keep your budget categories, your transactional categories at a level of granularity that's appropriate for you.

This level of granularity will change depending on your situation and it will change over your life. For today, I'm going to assume that you're just getting started. When you're just getting started, you've made a New Year's resolution to save more money. You need good tools and you're going to need to build new habits.

Once those habits are built, it's going to be less important for you to track them carefully and specifically. But as you're going through the process of building those habits, you'll need to track things in a detailed way. Almost every diet book that I've read or diet plan that I've observed has begun with some form of a food journal.

The food journal is a useful tool to try to figure out your baseline. What do you currently eat? How do you currently eat? And then the diet plan or the diet coach will start to adjust that. Now sometimes it's a whole scale adjustment and they want you to go from all the way from the standard American diet onto the Whole30 Cleanse diet.

Or sometimes it's a minor adjustment and the person has a philosophy and says, "Well, let's just start by changing out a few structural things." But it always starts with tracking. People who are advanced in their healthy food consumption generally don't write down every bite of food that they eat.

There's no need for it. That would be a poor use of the time because they've built those habits. But people who are beginners need that level of granularity and that same thing with money. If you're going to build wealth and maintain it, there will never be a point in time at which you can walk away from having an awareness of your budget.

Doubt me. Just search for common celebrities who make tens of millions of dollars and a few years later are totally broke and bankrupt. They're very sad stories but usually it's because they don't have a grasp on how much money is coming in and going out. Yes, it sounds like a lot of money to earn $10 million in a year and it is.

But executive jets are not inexpensive. It wouldn't be uncommon for somebody who maintains their own plane to spend a couple million bucks a year on that particular habit, not even including the purchase price. So anything can get out of hand. Frequently, people who earn a lot of money, if they don't keep an eye on the outgo, they don't have the system in place where they're going to be able to make good decisions long term.

So I'm about to talk about groceries. I don't want you to think that somebody who is earning millions of dollars per year needs to sit down and carefully itemize their receipt for their grocery expenditures. You don't. But almost every millionaire I've ever interacted with or I've ever read will at least have a general idea of how much their family spends on food in a given year.

It can be as simple as having the end of the year Amex statement or it can be as simple as just sitting down with whatever is built into their bank and say, "Okay, we may have spent about this amount of money." But you need to have some idea of those categories.

When you're starting, however, a different level of granularity is helpful. Now let's start with the basics. A good place to start for many people in terms of tracking the money that they're spending so that they can make better decisions would be something as simple as differentiating the amount of money that they spend on groceries versus the amount of money that they spend dining out.

If you're just getting started, start there. Just start tracking how much money you spend on restaurants and how much money you spend on groceries. It would not be at all unusual for a family who's given to profligate spending and trying to cut back to discover that they're spending $1,000 a month on restaurants.

Relatively easy to do if you're not a single person but you have a habit of eating out consistently. It wouldn't be unusual to spend $500 a month on restaurants. That would be fairly common among middle-class US Americans. The first place of specificity could be how much am I spending on restaurants versus how much am I spending on groceries.

You might have a goal and might make major progress just by pulling back on the number of times that you dine out and pushing over in the direction of buying groceries. For somebody that's given to consistent eating out, that could save 50% on your food budget right there. That would be the right place to start.

It's relatively simple. You just have to track the difference between groceries and dining out and that can make progress. But what's the next step? Perhaps you've decided that you're still not happy with your performance in a certain area and this is the case for me. I've always tracked the difference between eating out and groceries.

I've always accounted for that difference but I'm unhappy with my expenditures in this particular area. The next thing I need to do then is figure out what's going on. There are different levels at which I need to figure that out. Many of us will shop at stores like Walmart or Costco or Sam's Club or Target and these stores can be very challenging because they sell essentially everything.

If I'm looking at a bill on a bank statement or a credit card statement for Target, am I looking at a bill for groceries, new swimsuits for the children, a new GPS for my car or a refill card for my prepaid cell phone? I can't tell that by just looking at the bank statement.

If I'm looking at an entry for Costco, am I looking at tires, dog food, paper towels and toilet paper or cheap rolled oats that we use to make our morning oatmeal? So let's start with that. The first thing to do is to make sure that your tracking system is going to be differentiated more – on a more granular level.

This may include things that are part of your household but are not. So the best example here is – relates to groceries. It's very common that we'll buy paper products for the household and things like cleaning supplies with our groceries. The first thing when you start trying to compare grocery budgets with people is you need to ask them, "Does that include things like toilet paper and paper towels or does that – and wipes for the babies or diapers or does that include just pure groceries?" Those categories make a big difference and many people, because they do that shopping concurrently, don't know the difference.

In my own accounting system last year until I really started focusing in a few months ago, I wasn't entirely sure that I had been perfect with separating those transactions out. It's a little bit of work to take your receipt home from Costco or from Target or from Walmart and actually figure out what did I spend.

Target makes it the easiest because they break it out into categories automatically. But Walmart and Costco don't. So you got to think about it and especially if you don't even do something like – a little trick that I use is make sure that – you may bring it up in separate transactions although I only do that if I'm purchasing things that are business expenses and personal expenses to make sure I have separate receipts.

If I'm purchasing printing copy paper at Costco and groceries, then I'll bring it up in two separate transactions for business expenses and personal expenses. But put it on the cart – sorry, put it on the conveyor belt in an organized manner. So keep all your food together and then if you're buying oil for your oil change and put that separate with the little doodad, the $100 thing that you thought would be cool to buy because it was advertised and then put your paper products at the end.

So that way when you get home and you analyze your receipt, you can properly enter the data. You have to do this manually and it takes work. But that's the first level and that's important because you might find that your $1,000 a month average is actually being caused by the $200 a month impulse expenditures that you make because it's a great deal on a cool thing.

For most of us who shop at those stores, Costco is the worst and the best, simultaneously the worst and the best. Why? The way that Costco works is they have a certain products that they always have. Then they're always bringing in new products. When Costco brings in a product, they'll offer a good product, a good deal, but they won't keep it around forever.

So you know if you think you're going to want it, you basically have to buy it now or come back a few days later because it's not going to be there next month. That results in more binge buying, more impulse buying or at least a stronger temptation to do that.

Based upon their strategy of sizing large packages, you wind up spending more money than you might otherwise spend. You didn't know that you were going to go shopping today for high-quality leather work gloves, but of course here are some and that would be useful to have. It would be nice to have that.

But of course it's not just one pair. So you've got to go ahead and buy a package of three pairs or you didn't know you were shopping for flashlights today, but you know what? It would be nice to have an extra flashlight or two, but this is a set of four.

Now you got four flashlights instead of one. That's the great temptation of some of these stores. So it starts by breaking those things out so you can look and maybe what you find is you don't actually spend too much money on groceries. What you actually spend too much money on is those impulse purchases.

That's helpful. Now you can adjust your behavior by finding out what's actually going on. This simple practice can solve a lot of marital stress. I know I've talked to a number of husbands who get all mad at their wives and say, "Honey, why are we spending so much money on groceries?" Especially if she's – usually if she's the one who is responsible for the food budget.

She might go through and look at it and what she actually find is that it's not the wife who's spending too much money on groceries. It's the husband who when he goes with her to Costco every other week, always find some new doodad, some new cool gadget and that's the problem.

So this level of tracking granularity might bring a little bit of marital peace to your household. But you might go farther. So I've done an OK job in the past of breaking those things out. But I'm still not happy with my results in our grocery expenditure. So what I've done is I've taken things to a deeper level.

The reason that I've done this is so that I have better data to find out what's going on in my household so that we can make major progress. I won't do this forever. But for now and probably for this entire year, I've broken things out to an even more granular level.

So I switched from just saying groceries to the actual categories of groceries. I created in my budgeting software new categories for fruits and vegetables, meats, eggs, dairy, bread, grains, coffee, alcohol, sweets, non-categorized groceries. I put all of these things and broke all of these things out so that I can understand what's actually going on.

It's one thing for someone to say, "Hey, you'll save money by buying less meat." It's another thing to look down and realize, "Oh, you know what? I'm actually spending $100 a month on really nice meat that I really enjoy eating but it's expensive meat." That may be perfectly fine in your situation.

But you may choose that decision actively. But at least you'll have the data. And so by breaking things out into very tangible categories, I can start to see how much am I spending in these different categories. What's the percentage makeup of our budget? And then we can make a decision appropriately.

Now I think I have a pretty good idea of how these categories are going to shake out. I don't think my coffee habit is costing me $20 a month. I think it's less than that. But the data will tell. The categories will help me. Now is it work to come home with a receipt and to break it out and to calculate it?

Yes, it is. But that's a good thing because when you're trying to save money on something and you're trying to make an intentional habit, being aware of what's going on will help you. That's the key, is awareness. And that process of sorting out the receipt, and I want to make it simple by trying to group things according to my budget categories, but that process will help you to solve and understand what's going on.

Now I've applied similar things to things like eating out. So we don't do a lot of eating out. But one of the things that I've wondered is what percentage of our dining out is planned versus unplanned? Perhaps you would do planned meals out or unplanned meals out. What do I mean?

Well, there's a difference between scheduling to go out with some friends and we're going to go out to an intentional dining out choice. We're going to go to a restaurant that we enjoy eating at for a specific occasion and we're going for the experience of eating out with friends.

That in my mind is a very different thing than arriving late in the day, everyone's falling apart, we don't have any food prepared and so we just have to go out and we wind up eating out just because that's what – it was a stressful situation. And that's different than we're traveling across the state and we stop and wind up eating fast food instead of having food from home.

So I've broken all of our dining out into different categories that are useful. Meals for convenience or meals for celebration or sweets out, trying to get a tracking on what's actually going on. Make up your own categories but figure out how to use a category that's going to apply to the thing that you're trying to accomplish.

If you notice yourself spending by being forced into spending by circumstances, that's the time at which you recognize what's going on. You probably go ahead and make the expenditure under the circumstances in order to solve the crisis. But then you've got to come back and make a new plan.

So one thing that we try to do is have food options in our house that are quick convenience foods that can solve that problem. So when we don't have time to cook from scratch or we don't have time to cook something that is totally homemade or which would be usually more healthful and less expensive, at least we have some in-between prepared foods.

If those in-between prepared foods are there, they're a whole lot easier and cheaper than going out to eat. Yes, they're more expensive than the ultimate baseline but let's solve that problem of convenience with something that is convenient but it's not as expensive as taking a whole family with children out to a sit-down restaurant.

Or here's another strategy that you could use. Perhaps your particular situation doesn't involve wanting to have convenience foods at home. But can you think through where you would go and what you would do to have convenient but less expensive restaurant food? You can put together a strategy that allows you to dine out – actually out but does it cheaper.

So here would be my example. I think the best value, at least with restaurants around me and I'm blessed to have many, but I think the best value for this type of thing is Chipotle. At least at Chipotle, I can get – it's a quick-serve restaurant. We can be served quickly.

It's healthy food. It's basic whole food. It's not weird stuff that I don't know all of the ingredients that are in it. It's essential food of decent quality. I'm a burrito bowl fan. I think a burrito bowl is the best deal out there. Half of a burrito bowl will fill me up and feed me.

It works well with the children. It's a sit-down restaurant. We have a sit-down restaurant but there's no tip required, which adds 20 percent to a standard restaurant bill. So I can think about that and I can say, "All right. Well, our plan for when we need one of those crisis meals is going to be Chipotle." So thinking in advance, recognizing the triggering event, perhaps you may go online and go ahead and purchase some Chipotle gift cards from one of the gift card swap sites and get yourself a discount, 3, 4, 5, 6, 7, 8 percent discount on Chipotle cards and you go ahead and purchase some of those and have those ready to go.

Now the next time it's Thursday night, everyone's hot, everyone's tired and you need to go out, you've got a plan. Another triggering event from our lifestyle is traveling. When traveling with children, everyone starts to get tired. Everyone starts to get hot and just done and needing some food. And often when we're traveling, we're trying to go at an in-between time.

So I've been annoyed and frustrated at times where we wind up having a big fast food bill when it's not particularly the quality of food that I'd like to have and it's not particularly the price of food that I'd like to have. So got to solve it. Got to make a plan.

Well, what do we need? How do we eat on the road? What convenient food can we have that will solve the problem and how can we stock up in advance? So then the solution becomes purchasing some car snacks or some things that are always available, adding to our packing checklist when we're leaving, what food are we going to have available so we can avoid a $20 fast food stop.

These are all examples from the world of food, but the same principle applies to other areas. In order for you to make measurable progress, you usually have to get more granular in your analysis. You've decided that you'd like to save money on electricity. Great. How do you do that?

Well, you can flip some lights off here and there, but then you might be a little bit annoyed when your bill next month is still only $2 less than it was the month before. If you're going to save money on electricity, you start with analysis. Here's how I would do that if I were doing it for you.

We go around your house and we try to identify all of the users of electricity. We try to figure out if – to the best we can, what's going to make the biggest impact. Now in the world of electricity, there's going to be the big ones and the little ones.

Some of the big ones you can change or maybe willing to change and some of them you may not. But let's go ahead and we would make a list of all of those things. So I would start with things like appliances, the air conditioning or if you have an electric heater, electric heat, the dishwasher, the washing machine, the electric clothes dryer, the electric water heater.

Then you go to different things that are around the house, the microwave, the lights, the fans, etc. If possible, if you can get the data, for example, it's relatively easy to calculate the light draw of a lamp. You can either do it based upon the bulb or you can get yourself a kilowatt meter and plug it in and that's a brand name, Kilwatt, W-A-T-T.

Get yourself one of those little devices and plug it in and measure the actual power draw of it. Measure the power draw of your toaster. And then you can start and start to implement different strategies. One strategy may be how do I kill the phantom power draw of my TV, my cable box, my internet when I'm not using it.

Trot down to Harbor Freight, grab a couple of dollar power strips, plug it in where you have an off switch and install a new habit into your life where when you're done watching TV or when you're done with the computer, go ahead and flip the switch and completely kill the outlet to stop the phantom power load.

That'll save you a little bit but every little bit counts. So learning about the phantom power load and calculating the phantom power load will help you to cut your electricity bill. You may go through and install a new habit into yourself and your family of turning off lights when you're not using them.

And actually doing that will start to save you some money. You may change out some of your lamps for slightly lower wattage bulbs or you may go ahead and upgrade the bulbs in your house and move from incandescent into CFL or LED or upgrade your CFL bulbs when they go to LED.

On that case, your way of cutting is you're going to start shopping, find a good deal on LED bulbs and start purchasing them using some of the discount purchase strategies and swap those out. That'll be helpful to you. That'll save you money. And then you may look at each of your appliances and you may start to do an analysis there.

Perhaps you're – I'm not about to start washing my clothes by hand to save money on electricity on my washing machine. That's a big deal. But you could run the washing machine with a full load instead of with a partial load. So instead of doing your laundry so frequently with small loads, purchase a few more clothes so that you can get it through and run it with a full load.

That may be more efficient. With your electric clothes dryer, you go down and you string up a clothesline outside and you either dry your clothes fully in the sunshine or if you need them to be fluffed and softened, dry them mostly in the sunshine and then just finish them up in the dryer.

That will save you electricity. Or install a clothesline inside. If you don't want to leave your clothes out through the freezing winter and have them freeze themselves dry as our great-grandparents did, go ahead and install one somewhere else in your house, in your bathroom, in your garage or in some way where you can dry the clothes at least partially inside instead of just constantly using the electric clothes dryer.

That would be a strategy for drying clothes. Your water heater, maybe you turn down the temperature. Your safe operating temperature on your water heater needs to be 120 degrees. It always needs to be hot enough in order to kill bacteria. But you may turn it down. There's no reason for it to be 150.

Turn it down to 120 degrees. Perhaps you can go and purchase an insulating blanket to install – and install better insulation on your water heater or perhaps it's time to go ahead and upgrade your water heater to an instant hot water heater, electric or gas, or one that's more energy efficient.

Do the calculations and figure out if that's the right move. With your air conditioner, perhaps this is the time to go ahead and have spray foam insulation sprayed into your attic or to upgrade the actual air conditioner or just to get a new thermostat. Instead of having a standard thermostat, you will go ahead and install a smart thermostat which will help you to save money by changing the rating, the thermostat rating at a time that you don't use it.

Or go ahead and install some fans. If you'll install a fan and put a fan by your feet at your desk or install a ceiling fan in your bedroom, you'll be able to be more comfortable by having some circulation of the air which takes the heat away from your skin.

You'll be able to be more comfortable at a higher temperature on the air conditioner. Or perhaps you can install a window unit into your bedroom and at night when you are in your bedroom, you turn off the central AC and you just simply use your window unit. The point of these discussions is to give you specific practical ideas to save on your electric bill but also to demonstrate to you a method of analysis wherein you break things down based upon their category so that you can figure out the tricks to apply to savings.

One more on the electric bill. The reason I'm doing this is that your electric bill is not something that you can really beautifully itemize sometimes. Sometimes your electric bill is just an electric bill and if you just – you have your canceled check or the line on your bank statement that says electric bill.

So you're not going to use this method of detailed analysis in your budgeting software but you can use this in your analysis if you look at it the way that I've done. You would analyze your actual electric bill in terms of the things that might be available from your electric company.

With our electric company, they offer something where if you sign up for their overflow program, forget the name of it, they'll give you a discount on your bill. So they install a switch in your house and by installing that switch, they have the option to turn off a couple of your major appliances during times of high load.

For us, it's the summertime when it's very hot. They have the option of turning off your circuits to your air conditioning in order to keep their grid working effectively and well. There's a savings for that and because of that savings being there, it's worth it. In my experience after years of having this in the houses that I've lived in, I'm not aware of any time they've actually used it.

But it's a good savings mechanism to lower and get a discount on your bill. Or another example would be if your electric company may offer a difference of peak versus non-peak billing and they'll bill you instead of having a flat rate for 24 hours a day, they'll bill you a higher or a lower rate based upon peak usage.

Well, analyze your usage. Usually they'll help you do this and you may be able to change some of your usage patterns in order to use electricity at off-peak numbers versus the peak debt times. If you might do laundry at nighttime instead of during the daytime. Here in Florida, the peak hours are during the daytime when there's the giant load for air conditioner – for an air conditioning.

If your house is empty because you're at your office all day, there's no reason for you not to go ahead and participate in that program. You can leave your air conditioning off or turned up while you're away at work and then when you come home, that's the time that you turn your air conditioning on, start your electric stove.

That's the time that you wash your laundry and dry it anyway. So why not take the savings and use the off-peak hours? You have the ability to do this for every category of your budget. I'm not going to go through every category. I'm going to encourage you to do it.

But the point is for you to take and think in advance about the things that are impacting your budget. I'll give you one last final category example. With your giving and your gift, I think you should track that. But I think you should have a level of granularity that doesn't just say giving because there are some types of giving that you can minimize the cost of without minimizing the impact and the effect.

If you're giving your money directly, that should be tracked and that should be tracked so for your own personal accountability. If you are tithing to your local church, that's a dollar financial contribution that comes right off the top of your budget and so that should be counted as tithe.

A tithe is not to your local church. A tithe is not a three percent. That's a ten percent of your income into your local church. Similarly, that's not a contribution to your favorite animal charity. Perhaps you want to support your favorite animal charity but that should be reflected as a different category.

Now that type of giving or giving personally to people who are in need, giving them cash, that type of giving is different than the giving of gifts at scheduled occasions such as Christmas gifts or birthday gifts. For many people, this is one of those challenges especially when you have children and your children have friends.

It can be expensive to develop birthday gifts. Well, plan ahead. Develop a category called birthday gifts in your budget tracking system so that you are aware of how much money you're actually spending on the birthday gifts for your friends. Depending on age appropriateness, you can start to plan ahead.

When my wife was growing up, her mom always maintained a birthday box, a box of toys and gifts that were new, freshly available but that were purchased on discount and clearance and they were always available so that when there was a birthday invitation, then they always had a box.

Just go to the birthday box, grab a present and that way it will pass that along as a birthday gift. But you can buy those presents during the after Christmas sale and get them for 20 cents on the dollar. That's a good way of cutting back on your birthday expenses.

You need to isolate what's the problem. The problem is birthday gifts. Do I want to participate? For most of us, yes, I want to participate. Giving a birthday gift is valuable. But participating doesn't mean I have to go out at the last minute and pay full retail price for some piece of plastic.

I can participate in a way that is more sensible and is done in advance. Check it out appropriately to help you analyze ways to save money. The business philosopher and theorist Peter Drucker famously said, "What gets measured gets managed." That's perfectly true in the world of finance. What gets measured gets managed.

Finance is perhaps the ultimate expression of this because we're dealing with numbers in and of themselves and it's easy to measure those things. But measure them across your budget. Don't fall prey to the idea of, "Oh, I'm just good enough to figure it out." Guess what? You're not. You're not.

Nobody is that consistent and that in tune with what's going on in their life mathematically that they can just figure it out. You need to have a baseline of measurement. Now, recognize that there will be growth but look at some area of your budget this month and start measuring it so that you can manage it and so that you can improve it.

Whether this is at the small end of measuring how much money you're spending on meat, how much money you're spending on fruit and veggies, and how much money you're spending on the sales tax of your food. That's not a category that I maintain, a sales tax. It's interesting because by making different choices, make your own granola.

You can buy raw food and there's no sales tax. Make by the pre-made granola and you pay sales tax on it. It's where I live in a sales tax state. That's a 6% savings. Right there, it just has an example. So whether it's at the small end of your food or your electric usage or your mortgage and figuring out how much money you're paying interest and you go to the market and you shop it or whether it's looking at your investment portfolio and going through and calculating the expense ratio on your mutual funds and calculating the mortality and expense charges on your annuities and on your life insurance policies or on your disability insurance or your car insurance, what gets measured gets managed.

You can't measure everything all the time or at least I think very few people can do that. Many people, they just don't enjoy the minutiae enough to do that. You might. I do. I enjoy the minutiae. But you can measure it in specific points at a time and establish a baseline.

And once you've established a baseline of comfort level, then you can start to improve things from there. So get detailed with your budget. Your tracking is there to serve you, not to do just because it's objectively good. Thank you so much for listening to today's show. I hope this has been useful to you.

I think this will be my last one on this theme for a little while unless I have something else to share. We'll move on to more topics in the future. If you would like to support me and the work that I do, I'd be grateful if you'd become a patron of the show.

Go to RadicalPersonalFinance.com/patron. RadicalPersonalFinance.com/patron. If this information has been valuable for you, I deeply appreciate that. RadicalPersonalFinance.com/patron. This show is part of the Radical Life Media network of podcasts and resources. Find out more at RadicalLifeMedia.com.