You now have a clear picture of where your money is going, and this will help you with all of the other steps in this process. Use this sheet as a reference guide going forward, and be mindful whenever you make a purchase that you are just continuing to grow the numbers on that sheet.
In this next step, you will need to prioritize your needs, and look for areas where you may need to cut back. The goal in this is not to scrutinize your spending so severely that you cannot enjoy anything anymore…but instead, look for small ways in which you can change to make a big difference in the long run.
For example, if I consistently spend close to $100 on clothing every month, all I need to do at first is aim to spend closer to $50. This may seem like a small and insignificant change, but over the course of a year, I am saving $600. I bet you could use that extra cash for something right? (Hopefully savings…)
Just to give a small tip here…sometimes it can be difficult for people to cut back on multiple categories, so they start with just one or two.
This can be very effective, and don’t stress that you are not cutting back in all ways you possibly can. Usually there will be one category that stands out above the rest.
In my case, it’s always the grocery budget. During the weekend, or even if we are having company over during the week, I am always tempted to make these nice, extravagant, and expensive meals. I know that there are plenty of ways to make meals that are still beautiful and taste great, but don’t cost a fortune….yet…I don’t take the time to look for them!
It is amazing to see the difference in our monthly budget if I am simply just aware of what I can and cannot spend. On average, I would say that I spend at least $100 less every month on groceries if I am making a conscious effort to cut back.
The ball is now in your court. Go back to that spread sheet, look through each of the categories, and find avenues where you can start to shrink your spending.
Write your new and improved budget numbers near or below the totals of your old numbers.
For my clothing example:
Total = $102.00
New Goal = $50.00
In the next step, we will go through ways in which you can specifically implement this new spending plan.
But for now, keep the new and improved number in the back of your mind at all times, and whenever you make a purchase, remember the end goal, not the temporary satisfaction.
Make sure to write your new goals down, because later on in this process, you will want to write down what you actually spent and compare it to those standards.
Want more tips on how to stick to your budget? Watch out for the next Budgeting Basics 101 post!