How to Budget – Part Two

expensesIn part one, we explained the process of drawing up your monthly expenditures and comparing these to your income to find out if your budget balances. In part two we look at ways of cutting expenditure to achieve a surplus or at least balance your budget.

Remember, the monthly expenses we listed in part one included retirement and emergency savings, so even if you just manage to balance your budget you are still on the right track.

Spot your credit card doodads

Doodads are spontaneous purchases that you’d never repeat, given a second chance. Going through your credit card statement, look at each entry and classify it as one of the following:

  1. What was I thinking?? This was definitely a doodad (i.e. a waste of money!)
  2. I may buy this item again, probably in a smaller quantity
  3. This item was an essential; I have no choice but to buy it.

If a high percentage of your expenses are doodads, these should be the easiest items to cut back on. Many of our clients have found that cutting their credit card expenses by 25% can be achieved without much trouble at all.

Watch your cash withdrawals

Cash doodads can sneak up on you, because cash in your pocket is easy to spend. For every withdrawal you make, you need to be able to trace what happened to the cash. This means that if you aren’t keeping your till slips, now is the time to start.

Applying the same principle as you used with your credit card statement, try to identify doodads you can cut out entirely and try to limit your nice-to-haves until your budget is balanced.

Some Budget- Balancing Tips

  • If you have outstanding credit card debt, lock your cards away or cut them up until they are paid off completely – the interest payments can throw your budget off balance
  • If you’re concerned about carrying cash, buy yourself a grocery store gift card and use that to buy your small items like milk and bread.
  • A debit card is a good credit card alternative – if the cash isn’t there, you can’t buy with it.
  • To combat doodads, send a friend or one of your children into the shop with a grocery list – this will help you avoid temptation.

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