A dollar saved is a dollar less that needs to be earned!
One of the most important things you can do within your household is to prepare a budget.
I would wager that less than 10 percent of budgets started were finished and of the ones finished far less were actually put into action.
Doing a budget, even a rough one, can help you manage your household spending and help regain control of debt levels. Even without doing a budget it is possible to regain control of your spending however by preparing a budget the changes you make a more likely to last and result in a great benefit in the long term.
Try this….for the next few days when you are about to purchase something ask yourself these questions:
Do I really need this item?
Is this the best price I can get it for?
Is there a similar (or alternative) item I can get for less?
Will I get the full value out of it?
By applying these questions to any purchase you will quickly start to see little ways you can reduce your non essential spending.
A simple example of this process is when banana's rocketed up to $14 a kilo. I am sure many of us, if not all, chose not to buy bananas and purchase apples instead.
If you go to buy a bottle of wine and you would normally spend $30 consider buying a bottle worth $20-$25 instead. Put the $5/$10 you saved in a jar or money box, repeat this process with other purchases also tucking away the saving. In a few weeks time buying the cheaper bottle of wine will have had no detrimental impact on your life and the best thing is you will have the fiver/tener you saved to spend on something else.
It is important to set aside the saving you made and after a month count the accumulated saving to show yourself how effective this exercise can be. For those of you with a mortgage adding the $10 extra on top of you regular mortgage repayment will save you interest on the life of your loan. This simple choice can result in a significant saving over the term of your loan.
Lets say your loan repayment is 1 quarter principle and 3 quarters interest (ie $2,000 monthly payment is $1,500 of interest and only $500 principle) by putting the $10 you saved in the above example on top of your regular loan repayment will pay off $10 of pure principle and effectivly save you $30 in interest. In this example buying a bottle of win worth $20 instead of $30 has saved $30 in interest! Now that’s smart!
How to get more money in your pocket.
There are only two ways to get more money in your pocket:
- You go and work longer hours, forfeiting time with you friends family and loved ones, what the tax office don't take is what your left with in your pocket. Or
- Look through your existing expenditure and itemize where you are spending money. Further identify the areas that seem excessive or unnecessary. By asessing your expences and trimming them down where possible every dollar you save is a dollar more in your pocket you haven't had to go out and earn.
Think of all the items that are set up as direct debit from your credit card or bank account. When was the last time you assessed these items and made sure they still suit your current situation? By regularly assessing your expenses will ensure that what you buying is the right thing for you and for a price that fits within you budget.
One of the main things drawing up a budget will assist you in doing is separating wants from needs. Sorting the essentials from luxuries. Too often is the case where luxuries start to creep into the category of essentials. I would never suggest we forgo all luxury items but the main point I am making is that we need to live within our means or run the risk of a financial meltdown.
Take control of your spending now. The money you save can then be spent on the things that matter most!
