Comedian Dax Shepard says you should ‘clean up’ this part of your finances. Pros say it’s an easy way to save thousands
Armchair Expert host, actor and comedian Dax Shepard may be worth $40 million, but he hasn’t forgotten how to save.
Actor and comedian Dax Shepard has a long list of accolades that include television shows, movies and his hit podcast Armchair Expert. That’s helped him amass an estimated $40 million net worth, according to Celebrity Net Worth. But even with all that money, Shepard hasn’t forgotten how to save money — something that’s gotten even more lucrative in recent months, as some high-yield savings accounts now pay more than they have in a decade (see the best savings account rates you may get now here).
“First and foremost, people need to actually be aware of where they’re spending their money. It’s easy to get hyper-focused on things that aren’t really moving the needle,” Shepard said in an interview with Money magazine. “This is something Kristen [Bell, his wife] would do. She would drive herself bonkers about an item at the grocery store, and I would point out what she’s spending on some other high-ticket item that she isn’t even thinking about on the regular. If you clean up that aspect, then you can never think again about how much lunch is.”
Experts agree that cutting a big ticket item instead of lots of little expenses is not only easier, but also is often more effective. “We’ve found that starting with consequential changes that result in clear and significant financial advantages is often more powerful and more practical. Making a big change can be scary but that heavy psychological lifting happens one time,” says certified financial planner Jim Hemphill at TGS Financial Advisors.
That’s precisely why certified financial planner Akeiva Ellis recommends the simple and effective method of cutting more significant expenses. “It removes decision fatigue. Making a good choice one time can be so much more effective than having to make choices on a regular basis,” says Ellis. (See the best savings account rates you may get now here.)
A few years ago, Ellis moved from a modern studio apartment paying $1,600 per month to an older one-bedroom apartment and took on a roommate. “My portion of the rent was $712.50, a savings of $887.50 per month, or $10,650 annually. I did this so I would have room in my budget to prioritize saving for future life goals like my wedding, and it was the best decision I could have made,” says Ellis.
How to make a budget work for you
That said, for some of you, the little things can and do add up too much — and if you feel like you’re in that camp, tracking expenses is key. “I would suggest everyone should make a list of their expenditures and track them. I have found that when most married couples write down all of their expenses, they are usually spending at least $1,000 more a month than what they thought they were spending. It’s hard to find waste in your budget without understanding where the money is actually going,” says certified financial planner Joe Favorito at Landmark Wealth Management.
The first step experts say to take to get spending priorities in order starts with evaluating recurring expenses and peeling them back. “They make the biggest difference, so stick to 1 or 2 streaming services instead of 4 and figure out if there are cheaper substitutions in the grocery store,” says certified financial planner Robert Persichitte at Delagify Financial.
Essentially, it’s all about awareness. “You can’t fix what you don’t know. We’re in such an automated world that everything is happening around us and we don’t even know it. I would recommend you sit with your finances, review all credit charges and ask yourself if those things are helping you reach your goals,” says certified financial planner Marianela Collado at Tobias Financial Advisors. (See the best savings account rates you may get now here.)
If you budget appropriately, it shouldn’t feel restrictive, says certified financial planner Amir Noor at United Financial Planning Group. “If anything, it lets you spend money the way you want and eliminates the guilt because you planned on spending money on those specific categories,” says Noor.
Spending plans can be helpful for anyone who doesn’t have enough personal wealth to buy everything they might want. “This is where choices come in. If you can get into a mindset of prioritizing your spending and aligning your daily financial decisions with your priorities, you can have greater success making choices that help you have a balanced life today and in the future,” says certified financial planner Derieck Hodges at Anchor Pointe Wealth. Having financial goals and a plan linked to those goals encourages the use of spending plans so you can allocate money to your living needs now while also contributing to your long-term goals. (See the best savings account rates you may get now here.)
That said, budgeting takes effort to maintain. “Instead of monthly budgets, I only pull up annual budgets. The lowest-effort way to do this is to add up all the transactions for a merchant and see how much you spend per store. The totals might surprise you,” says Persichitte.
Having a budget teaches self-discipline and can bring a sense of peace and happiness that comes with knowing you have enough. “The need to want more and spend is insatiable and no amount of money can fill that desire,” says certified financial planner Neal Hansen at Net Worth Advisory Group.
While budgeting is useful for many, it’s not imperative for everyone. “If you have a lot of excess cash flow every month, you don’t need to live on a budget, but everyone should be aware of their spending and at least track it to eliminate waste and redundancy. Some people who are undisciplined about spending definitely need to budget to restrain themselves,” says Favorito.
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