Give Your Budget A PERK
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Budgeting is often touted as the best path toward saving money. Unfortunately, budgeting sometimes doesn’t work in the long term, as many people don’t have the discipline to log their every expenditure and say no to spending.
Instead of implementing a traditional budget, try PERK—an easy and effective money-savings plan, says Robert Pagliarini, founder of Richer Life, certified financial planner, and president of Pacifica Wealth Advisors.
Pagliarini’s PERK system makes reducing expenses simple. Start by listing all your expenses and then decide which ones you can “Postpone,” “Eliminate,” “Reduce” or “Keep.”
Don’t let the simplicity of the PERK system throw you, he says. Surprisingly, it’s a practical and powerful system that can help you prioritize and get your spending in line.
“For most people, budgets simply do not work. They are extremely difficult to set up and even harder to actually continue to use,” Pagliarini says. Instead, he adds, you can go through the PERK exercise in half an hour and save a few hundred dollars a month, noting, “It’s super easy, super quick. You can do it and see immediate benefits.”
Make a list
The first step is to list all of your routine living expenses and upcoming expenses, from groceries and the cable bill to health insurance and property taxes. Flip through old credit card statements and checkbook registers for reminders, categorizing your expenses as you go. You don’t need to have dollar amounts for each category; just the categories themselves should be enough.
Then, next to each category, write a “P,” “E,” “R,” or “K” to correspond to the system’s four categories.
If you are able to postpone incurring an expense, mark it with a “P.” Items in this category could include buying a new car, remodeling a kitchen, installing new carpet, or incurring a smaller expense like buying a new TV or upgrading to an iPad2.
Postponing an expense gives you more money today so you can save or invest it, Pagliarini says. Plus, it helps avoid impulse purchases. Often, he says, if you postpone a purchase for a few months, you are less inclined to make that purchase when the time comes.
Look for expenses that you can eliminate, such as magazine subscriptions, newspaper subscriptions, Netflix charges, or unused gym memberships.
“This is really where you want to spend as much time as possible,” says Pagliarini. “These are things that made a lot of sense at one point but don’t anymore and probably haven’t in a while.”
This category is a “gold mine of opportunity,” Pagliarini says. “Look at each of your expenses and ask, ‘Is it possible for me to reduce it?’” You can often slash the money you spend on restaurants, movies, cell phone bills, and groceries. Skip the Starbucks latte and bring a brown bag lunch two days a week and you can save $100 a month or more.
Some expenses are must-haves, like health insurance, auto insurance, mortgage payments, and rent. Mark these with a “K.”
“By going through the PERK process, you become aware of where the money is going,” Pagliarini says. “The thing that it gets people probably more than anything else is awareness. That’s what’s lacking for most people.”
A Chicago-based writer and editor, Eve Becker writes about personal finance, health and other topics. She is a former managing editor of Tribune Media Services.
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