How to Control Your Household Expenses
Running a home is expensive. Whether you rent a property or have a mortgage, it is essential that you control the money coming in, just as much as you do the money going out. You need to have a complete understanding of where your money is going and what the reality is of your financial position. It’s not fun, it’s not pleasant, but it is necessary.
The average American has around $38,000 worth of personal debt (not including mortgages), which when you consider that the average wage is $44,564, you can see why sorting out your finances is a serious business. Living in denial about your financial situation is a dangerous game to play; it’s like a house of cards. Could you manage if you or your partner were unable to work through ill health, even for a month? As soon as you face up to your situation, the sooner you can improve your circumstances.
Review your finances
You need to invest your time in reviewing your finances. Begin by getting your latest bank statements, if possible, access the last three months’ worth. Doing so will enable you to calculate an average cost per month and will allow for extra expenses due to birthdays, vacations or other extraordinary costs.
Create a simple excel spreadsheet and head the columns into where you’ve spent the money, for example, housing costs, groceries, insurance, utilities, fuel, clothing, phones,and entertainment. Don’t forget to include a column for miscellanea: things that don’t quite fall into a defined category. Populate the spreadsheet with the information from your bank statements. When you have finished, you will be able to see the total for each of the columns. If you have a partner, husband or wife, you need to repeat this process from their bank account too. If you have used three months’ worth of bank statements, divide each total of the column by three as this will give you the average spend per month.
Hopefully, what you see before you is not a great shock, although you may be surprised at where you have leaked money. Next, using the statements, identify the amount of income that you have had coming into your accounts each month.
How’s it looking?
Is your monthly income greater than the expenditure? If it is, congratulations! The difference between the two figures is what you could potentially save per month.
If your income is less than your expenditure, you are getting more into debt each month, and action needs to be taken to take positive steps to change your financial status. You also need to check and see how much outstanding debt that you have against you. Personal debt comes in many shapes and sizes, including credit cards, student loans, car finance,and mortgages, and to get your house in order, you need to tackle your debt.
Set a Budget
Now that you are clear about your income and outgoings, you will be able to see how much money should be attributed to each category of spending. Some categories such as cell phones and housing will be set each month, so they are easy to put a number on. Categories such as groceries and entertainment which are variable each month are less so, but this is where the savings can take place. When you reviewed your bank accounts, you may have identified subscriptions that can be canceled, or at least reduced. Contact utility, insurance,and cell phone providers to see if you can go on a better rate. It is incredible the discount that you can negotiate if only you ask the question!
Budget to allow you to have the necessities and accept that you are going to have to go without certain goods and products while you are on a mission to sort out your money.
Life has a habit of throwing a curve ball, so you need to make plans for the unplanned emergencies such as your car requiring a repair, or a medical bill. These kinds of small but significant costs can be covered by a payday loan like those offered by Bonsai Finance. Although taking out a loan is not always ideal, and you may not want to do it, if you need to use your car for work, it makes economic sense to do so.
Change your lifestyle
Enforcing a budget can be tough, so it’s vital that you get all the family involved. Kids are more likely to engage with the cutbacks if they understand the whole picture. Rather than taking them for convenient,fast food when they are hungry, include them in choosing what food to make at home. They will moan, but they will soon get used to it, especially if they get to eat their choice!
Get into the habit of going grocery shopping with a list and stick to it. Avoid the aisles where you know you will be tempted by things not on your list. Buy non-branded products; there are some that have the same ingredients as the big brands but without the need for you to pay for the label.
One of the hardest things about trying to reduce household expenses is getting over the feeling that you are being deprived of something. Not being able to go and watch the game or go out for dinner can mean that you end up resenting the whole process; however, you just need to adjust your expectations. You can still watch the game with friends, just not in a bar. Instead of going out for a meal, eat at home and go out for dessert. By making lifestyle tweaks, you’ll soon be able to see a healthier bank account.
Don’t just complete this exercise as a one-off. Periodically review your expenditure to see where more savings can be made. A visual representation such of a bar chart of the savings you have created is a great motivator to continue the good work, set yourself a target to reach and agree on something to do to celebrate, perhaps even a full meal out!
