Ask Ellen: Your questions answered

A simple rule of thumb for saving and spending.

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A financial consultant at Fidelity, Ellen O'Connell, CFP® recently answered one of your money questions.

I'm determined to get a better handle on my money this year. I have a few different goals but I'm not saving as much as I had hoped. What can I do?

Let me ask: Do you know where your money goes every month, or do you wonder where it went? It's hard—nearly impossible—to save for the goals that are important to you if you aren't clear where on your paycheck is going. Many people I've talked to have a clear idea of their essential expenses, (that is, things like rent or mortgage, utilities, child care) but when it comes to the discretionary expenses that's when things get a little less clear.

Recently, I went away for the weekend with some friends and one of our many discussions turned to money. These ladies have a lot going on in their lives but had a common problem: They weren't sure where their money was going. As they've been growing their careers and families, spending has been creeping up. So I suggested a friendly contest—who could most accurately guess how much she spent every month on entertainment (concerts, nightclubs, movies, museums), subscriptions or memberships (magazines, newspapers, tv/movie/music apps, gym fees), and eating out (breakfast, lunch, dinner, coffee). Before we parted, they made their guesses, then added it up when they got home. Most of them were spending MUCH more than they guessed. It was eye-opening!

To get started looking at your spending, you could:

  • Track your expenses for 30 days. Are you spending less than you earn? If not, by how much?
  • Review your credit card statements. Are there monthly subscriptions or memberships you’re paying for that you don’t use?
  • Be more aware of small, impulse purchases. Spending a few dollars here and there can add up fast.

The good news is that it isn't about micromanaging every penny. Analyzing current spending and saving can give you control—and confidence. Most everyone's financial situation will change over time. A new job, marriage, children, and other life events may change cash flow. It's a good idea to revisit spending and saving regularly, particularly after any major life events.

About Ellen

Ellen O'Connell is a financial consultant at Fidelity's Investor Center on Congress Street in Boston. Throughout her 20 years with Fidelity, Ellen has helped clients develop financial plans to achieve their individual goals and improve their financial wellbeing. Most recently, Ellen worked on the Women Investors squad, focusing on empowering women to become more engaged with their finances.

Ellen holds a bachelor of science in business administration from Merrimack College in North Andover, Massachusetts, and is a CERTIFIED FINANCIAL PLANNER®.

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