One of the best ways to meet our financial situation always real, is taking a careful control of expenditure. We saw some ways to control spending on items How I can save some extra money? , Tips to help you spend less and save more, or How to make a budget.
Knowing exactly where we spend our money we can help the one hand, to identify the degree of need for each expense, and secondly, to know in what areas we can try to reduce spending. Our intention is to reduce spending on some things not essential to spend the money to pay off other debts or charges that we have, improving our financial situation this way twice.
Monthly Plan Cost
We will make a monthly spending plan. We will try to have it ready a few days before the beginning of each month, to have time to make the occasional variations that can occur in both the expenditure and income.
Categories of expenditure
First, we will establish a number of categories of expenditure, expenses and payments as we know that we will have: mortgage, rent, insurance, gas, electricity, water, community neighbors, telephones, Internet, gasoline, maintenance car, credits and more, food, clothing, school, leisure, health, personal care … and everything we know to be paid, and add a paragraph and call Contingencies.
Expenses not covered
In this section we will attach a small amount (eg € 50 per month) to leave remaining for any expenses not covered in our spending plan.
Some of these costs are known in advance, and others not. Among the latter, try to make a forecast as closely as possible, always trying to not be very optimistic (not too much to expect lower payments.) We will be prudent and better calculate payments higher than after lower than expected result on the contrary, and falling short of our expenditure projections.
Minimum charges
You could set for other expenses such as food or clothing, that do not involve losing minimal quality of life, sufficient to live well, but try not to exceed (for example, we put a limit to food that does not involve buying short of food, but to avoid unnecessary whims or expensive designer products).
Contingencies
When we have the total amount of the estimated costs, we’ll add 10% extra, because experience tells us that there are always unexpected bills which were not expecting.
Expenditure over income
Once the estimate of expenditure increased 10% in that, confronted with our income. If they are known in advance, as often happens, there will be no major problem.
If our revenues are variable, we here also a forecast. But to be prudent, if not certainly know our income will sin of pessimists and put a quantity restraint. One method might be to use the average of the last twelve months, unless we have more data that allow us to know beforehand how much you charge so (for example, someone who charges commissions know if that month is selling a lot or little) . With experience, it will become easier to plan and to better align spending forecasts.
More revenue than expenses
If revenues are greater than anticipated costs, we will have a surplus of money, if the forecast is well done and covers all expenses, we can allocate to reduce our debt and credit. This is money that if you do not take her control will almost certainly spend in other things not necessary.
More expenses than income
If, however, incomes are lower than expenditure, we have to reduce some costs expendable, such as telephone, Internet, clothing, etc. We will have to spend less to balance the spending plan. If this situation is repeated several months in a row, it would be a good time to rethink our position and move to deeper action, such as renting instead of paying a mortgage, change jobs for better income, try to reduce consumption, etc.