Posted by: thesavinghabit | May 27, 2010

It’s Your Money, Be Aware!

One of the biggest things you can do to save money is to be aware of what you are spending. This is also the first step in setting up a budget. You have to know what you are spending in order to see where you can cut back.  Put your “spending cash” in an envelope and then write on the outside of the envelope the date, amount, and what you purchased each time you take money from the envelope.  For now, focus on your unplanned spending – the times you stop and buy a cup of coffee or a soda, etc.  Or, if it’s a planned shopping trip, record the amount you spent on the unplanned purchases on that trip that were unnecessary purchases.  At the end of the week, total up how much you have spent.  You really should do this for at least 2-4 weeks to get a realistic picture of how you are spending your money.

 Let’s just look at one example. Say you know you purchase about three sodas per week at $1.50 each.  That is $4.50 per week, which doesn’t sound like that much. But let’s expand that out a bit:  That would be $19.50 per month, or $234.00 per year.  If you do this for 20 years of your life, that is $4,680. It would actually be much higher than this because this doesn’t even take inflation into consideration.  I’d say that is probably a very conservative example of unplanned spending.

 I do believe that having a certain amount of “spending” money is important. This is money that has been allotted for unplanned purchases. But, if you are on a tight budget, you may not be able to justify $4.50 per week just to purchase soda, as in this example.  If it’s really that important that you have that item, consider purchasing it in bulk and then have the discipline not to consume it more frequently than you were doing before.  This will allow you to spend less and get more.

 So, to determine how much “fat” you can trim from your budget, start off with this simple step to help you realize how much you are actually spending.  Not only will this help you become aware of your spending, it will also help you to determine what is or is not a necessity. I think you will be surprised by the result. 

I grant permission for every reader to reproduce on your website the article you are now reading but copy this article, without any alteration whatsoever. Include the copyright statement, too, please.

 “Copyright © Renita R. Perrone All rights reserved. Permission granted to reprint this article on your website without alteration if you include this copyright statement and leave the hyperlinks live and in place.” www.wowyousavedhowmuch.com

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