Do you spend every penny that you earn each month? Doing so is an easy thing to do these days because of the high rate of inflation that has taken place during the last three years. Then again, tens of thousands of people are going deeper into debt because it seems that it is impossible not to go into debt, just because those things that we need to remain healthy and alive cost a whole lot more than they once did.
When was the last time that you got a raise in pay? If you were lucky you got a 3% increase during the past year and maybe you also got a year end bonus. One thing for sure, you need to take a good look at why and for what you spend your hard earned money for, just to remain healthy and alive.
Now is no better time to make a list of the things that you regularly purchase each month. That is called making a list of your expenses from the prior month. You can further analyze such expenses by category, such as food, shelter, transportation, utility expenses and entertainment. In other words, total those items that you pay for each month.
Having done so you now know what your basic living expenses are expected to be for the current or next month. If you do spend more than you earn you must find ways to reduce the amount of money that you do spend each month and set limits on how much you spend for each category on your list. Doing so is called making a budget and/or developing a realistic spending plan.
You also have yearly and/or semi-yearly expenses, such as insurances, doctor visits and Real Estate taxes if you own the place where you reside. If you are truly wise, money wise, you set aside a portion for your monthly income to pay for those items too when they become due and payable. You will most likely set aside an amount of money each month to pay for some unexpected expense that is usually due to some emergency that might arise at any time.
By now you should have a good idea of where and how you spent your hard earned money during prior months. Additionally, you have an excellent means to determine what your future expenses will be during the next six months or longer. Most people do find ways to reduce such reoccurring and necessary expenses. If you know for what you spent your pennies you will soon discover how and for what you spent your monthly income. You can be frugal but not cheap, when it comes to meeting your financial requirements.