Cut your expenses and get creative!

Ever feel like you get part way through your pay period, you're nearly out of money and you just can't explain where a good amount of it went? Worse still, it can often mean that the one thing you really wanted to do this month is now no longer possible. You're gutted, because now you can't go to that restaurant or concert, or whatever it is you really wanted to do! You're not alone. In fact this is the cycle that many people experience.

Now imagine if it was the opposite. You know how much the one thing you really want to do costs and instead of getting that take-away, having that extra beer down the pub or buying that jacket, you choose not to and have more than enough for what you really want to do and at the end the month you end up with some extra money to put into savings. Suddenly you're controlling your money instead of it controlling you! How would that feel? Amazing, right? Well it is just a matter of simple planning and budgeting.

When the word, budget, is thrown out I hear a lot people responding with "I'm no good at numbers", "budgeting is far too complex", or "I just can't be bothered". In reality, coming up with a simple budget is neither complex, nor takes much time, and for those with a fear of numbers, by sticking to some basics tips I have outlined below, the numbers suddenly all add up and become easy! Once you've set up your budget, it really only takes 5 minutes a day to make sure you are keeping on track! So, for 5 minutes a day, using a really simple method is it worth it so you can go to that restaurant next month?
The first thing you need to do is to get a real understanding of where you are spending your money. Continue to spend as normal, but take a receipt or note down every time you get your wallet or purse out. At the end of the day, tally this up, either on paper, your computer or your phone. Make sure you note exactly what you spent it on and don't use a generic term such as food or transport.
Once you have tallied up a fortnight or month's worth of expenses, divide up your expenses into the categories of necessities, sanity savers and luxuries. Luxuries are those big-ticket items that you can cut out or do not provide you with the level of enjoyment worthy of the price. These could range from anything such as expensive nights out to take-away lunches and coffee. According to your money magazine "if you drop into your local café on the way to work each morning, be aware you’re spending $728.20 a year on your morning ritual", or "if you buy lunch five days a week, you’ll spend approximately $2,200 this year alone on lunch." That's not even taking into account those extra coffees or teas throughout the day! Sanity savers are those items that the level of enjoyment you get from them far out-weigh the financial cost and are not budget busters. For some people, these might be one night out a month with a limit on the spend or a DVD a week.
Next, work out both weekly and yearly buffers that you can afford. Your weekly cash buffer will mean that if you go slightly over your weekly cash spend limit, it will not affect your hip pocket and will not end up going on the dreaded credit card. By incorporating an annual buffer into your budget, unexpected medical, car or house maintenance costs will also not affect your bottom line. If you get to the end of the year and have not needed to use your buffer for these types of expenses, then great! You will have extra money that you can funnel into your savings or retirement investment plans.
Calculate how much your short term, medium term and long term goals are going to cost. Do you need to replace any household items this year? Do you need a new pair of boots this year? Do you want to buy a car? Plan for this in advance and you won't need to draw on your long term savings. Another important point to note is that you should aim to only buy these items after you have saved for them. Ask yourself, do you really need it right now?
The next step is to draw up a new budget, incorporating your buffers and goals. Then try to stick to just spending on the necessities. Cut out the luxury items and save the sanity savers for those times you are are really pulling your hair out from trying to stick to your new budget. Eventually you will need the sanity savers less and less, and the fact that you have already budgeted for them, means they can go into extra savings when you don't need them. Visit MoneySmart.gov.au to download and use my favourite free on-line budget planner.
Finally, don't keep all your money in the one pot or bank account. If you separate out your weekly cash limit, bills, buffer, short/medium term savings and long term/retirement plan savings, you are less likely to dip into the wrong pot. For example, withdraw your weekly cash limit and weekly buffer at once, then leave the weekly buffer and credit card at home. If you get to the end of the week and haven't had to use your buffer, withdraw your next weeks's cash limit minus what was left over of the buffer. The excess buffer can then add to your savings.
Following these steps will not only mean that you will not go over your budget, it will also mean that if you do not need to use your buffers you will get additional savings! Bonus!!!

But you can also do more. You can get creative with your expenses. From little things, like planning your weekly meals and shopping once off per week according to your meal plan, you can save on popping to the corner store and buying at heavily inflated prices. When doing your shopping, you can look for cheaper substitutes. You can shop around for cheaper utilities suppliers to reduce your bills. Or, have you considered taking in a lodger? Downsizing? Renting out your place and joining the house-sitting movement or the grey nomads? Selling some of your assets or odd-bits lying around the house? Catching buses instead of taxis? Growing your own veggies or repairing your own clothes? All of these, and many more will help you to significantly cut your expenses and save you a bundle!