Where to Save the Most In Your Budget?
My wife and I have been tracking our spending for well over a decade now. First using pencil and paper and later with what has become our Simple Family Budget Software which is available here: http://www.libertiny.com/libertinyfinancial3/?p=420
With Detroit on the leading edge of the global recession, we made the decision two years ago to cut our spending by 50%–basically assuming that one of us would lose our job. While this hasn’t happened yet, after two years of effort, we’re now prepared if it does happen.
Here’s how you can expedite what we did…
For our family of two, we’ve tracked 31 metrics of our spending. The Top 3 areas where we spend the most:
1) Mortgage
2) 2nd Mortgage
3) Food (Groceries)
These 3 catagories account for 40% of our after-tax spending. With Food accounting for 9%–now you know the reason why we’ve focused so much of our attention on cost reductions in Food. For our article dedicated to Grocery Cost Reduction: http://www.libertiny.com/libertinyfinancial3/?p=442
This is also the basis for our upcoming Budget Challenge.
Focus your attention on where you get the biggest bang for your time applied to reducing costs. While it may be satisfying and necessary to squeeze your cell phone supplier for a cost reduction, after looking at your budget, you may find that your time is better spent elsewhere.
We also divided the categories into two areas:
1) Expenses that we don’t have much control over (Mortgage, Fuel for Automobiles, Water/Sewage expenses).
2) Expenses that we do have control over. This area is where we focus our attention on a weekly basis and includes 12 categories. The Top 3 categories (18% of our total budget) that we review each week to ensure that we’re not exceeding our budget:
2a) Food
2b) Household operations (everything from home maintenance and cleaning supplies to fertilizer for our lawn).
2c) Entertainment. For more on how to reduce your Entertainment costs and still have fun: http://www.libertiny.com/libertinyfinancial3/?p=302
While 31 categories, or however many you have, is good to review once a year, with everyone’s hectic lives, it’s impossible to focus on so many categories on a weekly basis. And sticking to your budget on a weekly basis is the key to success. It’s also important to focus on a few items that you have easy control over, otherwise this process becomes overwhelming.
Try identifying the Top 3 budget items that you can readily control your spending on and target a reduction of 25%. You’ll be pleasantly surprised by the savings and you’ll be a big step closer to cutting your total household spending.
Tags: budget, budgets, family, finance, financial, home, libertiny, money, personal, sa, save, saving, saving book, Software, spend, spending less, spreadsheet
