How to Adjust Your Cost of Living
Looking for painless ways to trim your budget and save on expenses? Follow these simple steps to easy savings.
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Instructions
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How to Adjust Your Cost of Living
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Get a grasp on the comings and goings of every dollar. In other words, know how much is coming in and and how much is going out. Sounds simple but, particularly with credit cards and payday loans, many of us spend far more than we earn. You may be surprised at how quickly casual spending adds up to empty pockets and unpaid bills. To do this, pull out bank statements and bills from the last three months. If you don't have any available, use a small notebook to record every dollar you spend, right down to the pennies, for at least one month.
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Categorize each expense on bank statements or in spending diaries. Some expenses, such as rent or mortgage, credit card payments and utilities will be fixed. Others, such as entertainment, food and clothing will vary. This is where you are likely to make most of your adjustments.
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Decide on your motivation for adjusting your cost of living. Now the real work begins. You may want to pay down debts, adopt a cash-only style of living (no credit cards or payday loans, spend only what you earn), or you may want to save for a big expense or rainy day. Staying focused on the why of what you're doing can help you keep your promise to yourself even when you begin to feel discouraged.
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Decide on the amount by which you want to adjust your cost of living. Be specific.
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Begin with your fixed expenses. Don't be afraid to be brutal; you'll be surprised at how quickly you'll adjust.Credit Cards and Loans: Negotiate reduced rates on high interest credit cards (paying on time goes without saying).Rent or Mortgage: Can you rent out a room? If your lease will end soon, can you seek out less expensive accommodations? If you plan to stay in your home, does it make financial sense to refinance your mortgage?Utilities: Call your utility provider for an energy audit. This will give you a good idea of where you're wasting energy and how you can conserve. Conservation is not only good for the environment; it is good for reducing expenses.Phone: If you don't use your home phone, why not get rid of it and put that $50 to better use? Monitor your cell phone minutes. Overage fees are a budget killer.Cable: Trade premium service for basic; there isn't anything great on most of the time anyway.
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Take a look at your variable expenses.Food: Clip coupons; make menus and shopping lists before you head to the store. Review prices carefully and choose store brands when it makes sense.Pocket Money: Give yourself an allowance and make it last for the week. It's OK to stop for coffee and buy lunch on occasion, but remember if you can't do it with your allowance, you can't do it.Other expenses (clothing, shoes, gadgets): Distinguish between needs and wants. Advertisers have happened on the magic action words, "you deserve it," to get us marching into stores. Perhaps you do deserve it, but you also deserve to live without constant money worries.
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Review all your expense adjustments to be sure you've cut back by your goal amount. Once you feel comfortable with your cut backs, write out your budget in two columns--projected and actual. The actual column (fill these figures in as soon you spend) should always be equal to or less than the projected column. If you can, save the difference for your mad money fund. Having a little fun cushion is another way to keep your spending on track and keep you away from those credit cards. It is also great motivation for staying on track; you are building in a guilt-free reward for your progress.
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Tips & Warnings
Continue to keep your spending diary as you adjust to your new spending plan.
Review your budget periodically.
Find ways to recognize your progress. Remember, this isn't punishment; it is a priceless investment in your financial future.
You can do this!
Stay focused and remember why you want to reduce your spending. It can be easy to veer off track if you don't keep your mind on your motivation.
