Most spending leaks are the result of impulse buying and frittering away cash in small amounts, which add up by month's end. If you're an impulse shopper, buying things you don't realize you need until you see them, don't hang out at the mall or your favorite department store. Impulse spending is often the result of powerful advertising messages that are so appealing that you buy things you don't need and often end up not using. Why let advertisers influence your decision-making?

Plan all purchases and don't buy anything that wasn't part of your plan. If there's something you feel you really must have, think about it for at least two days and if you still feel compelled to buy it, do a little comparison-shopping first so you don't overpay. Then plan on how you're going to cover the cost by reducing another expense in your budget for the month.

The Small Leaks

Grocery shopping is one area ripe for cost cutting. Do you buy a lot of prepared foods instead of doing the cooking yourself? There's a tradeoff between the cost and the convenience of prepared foods when you're too busy to cook. Snacks are another expensive item, especially if you buy the serving-size packages to include in the kids' school lunches. Consider buying bulk and using baggies. Buy generic brands. Use coupons.

Do the workers at the fast-food restaurants in town know you by name? If eating out is a lifestyle instead of a treat, consider cutting back on fast food and enjoying a monthly dinner out with your spouse or a friend. You'll feel like you've treated yourself, and you'll probably end up spending less money than if you regularly buy fast food.

What's the deductible on your auto insurance? It should be at least $250, and if you have a good driving record, $500 is even better. The certain cost of paying higher insurance for a lower deductible weighed against the likelihood of having an accident may not be to your advantage. If the car is more than eight years old, consider dropping collision coverage altogether, and just keep liability coverage on that vehicle. The cost of collision coverage on a car that is worth only a few thousand dollars is out of proportion to the benefit you receive, especially if you have a good driving record.

These are just a few ideas to get you thinking about how you can cut costs. As you go through each item in your budget and on your Net Worth Statement, you'll find others. Question everything and look at things from a different perspective. You may save more by coming up with a number of ideas for small savings than you will by trying to reduce the large expenses.

The Bigger Picture

Once you've reviewed your spending and identified some small spending leaks that you can plug fairly painlessly, start looking for the larger leaks. Review items such as your mortgage, car payments, taxes, and insurance policies. The most painful cuts will be those related to your personal habits and hobbies, but these areas often yield the biggest savings. Chapter 3 includes a more detailed discussion of how you can make significant cuts in these and other areas.