How to Know What Part of Your Budget to Cut

If you’re thinking about reeling in your financial situation then the first thing you’ll want to do is make a budget. So, for at least one month track every dime you spend. Write it all down and get ready to analyze it… and make some tough choices and realizations.

The primary goal, once you have your expenditures written down, is to analyze what you are spending, why you are spending it, if it is a need or a want, and what you can do to either reduce or eliminate that expenditure.

So, in a month’s time you might have a rental or housing payment, utility bills, gas for your car, groceries, eating out, clothing, and entertainment.

Determining What You Can Change

If you take a look at that list you can determine that while your rent bill will be the same month to month, you absolutely can control your eating out and entertainment bills. In fact, you could completely eliminate those two because they are wants and not needs.

The key here is that there are some bills that are set in stone – rent, for instance because it is contractual – while there are others like a grocery budget which you can manipulate by determining to spend less on these items. And then there are luxury items like eating out and going to the movies that are completely unnecessary and can be eliminated right off the bat as an expenditure.

To eliminate some unnecessary spending you could choose to drive less by combining trips or riding with a friend. You could lower your grocery budget by foregoing the high cost of convenience foods or lowering the number of high-cost foods that you purchase.

But, having said all of that, all of the above can still be changed, even the seemingly set elements.

Determining How You Can Change It

This is the point at which you can make some hard decisions… or not.

If your goal is to eliminate as many expenditures as you can in order to live free of debt and the need for large amounts of money then there are some seemingly radical steps you might take.

Our family, for instance, has chosen to live a simple life for a lot of reasons. One of the side benefits of this lifestyle is not needing a lot of money to do so. We live on two acres which are paid for. We are off-grid so have no monthly electricity bills. We try to eat as simply as we can and are working on growing our own food.

But, to keep things in perspective, most people on the planet today and throughout history did not have as much as we do. So, while today’s debt-based society might see things like living without electricity as “poor”, they are, in fact, totally normal. Simply owning a vehicle is enough to make you wealthy, historically speaking.

So be sure to look at your budget with a fair bit of perspective, both historically and currently.

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