It's easy for anyone's spending to get out of hand. If you're not keeping close, detailed track of where your money gets spent, it's all too common to have your bank account dip far lower than you intended and not know what happened.
Knowing how much you need, how much you have, and where your priorities lie will put the power back in your hands to spend or save wherever you actually want to.
It's Time for a Personal Audit of Your Frugal Living Budget
When is the last time you sat down and took a very close look at your budget? And by close, I mean an accounting of every single dime you spend, including that drive-thru coffee and the paperback you bought that you could have borrowed from the library.
There’s no reason you shouldn’t run your home like a business, and that includes keeping detailed financial records and performing a personal audit of your frugal living budget.
Even the most dedicatedly thrifty people can get off track, particularly when times are good. You figure that you just got a big bonus check, so it’s not going to hurt to go out for ice cream. Then you go to the store and decide, you’ve got extra money, so maybe you’ll just buy whatever you want instead of adhering to your normal weekly budget.
You decide to live a little, enjoy life, and the next thing you know, all of that extra money is gone and all you have left is a few extra pounds on your waistline or a new frivolous gadget.
And you’re right, indulgences are absolutely fine from time to time, as long as they don’t take away from your necessities. But instead of working the treats into their frugal strategies, many people get completely off track when a bit of extra money comes their way. If you aren’t careful, indulgences can become habits that can undo your progress towards a frugal, debt-free lifestyle.
It’s time to do a personal audit on your finances.
Figure out exactly where you are
How do you do most of your spending? If it’s with your debit card, it will be pretty easy to get started immediately. Simply print out your records for the last month, and then move on to the next step.
If you spend a mixture of money from your bank account and cash that you have on hand, you may have to get a notebook and start tracking your spending, then move on to the next step in a couple of weeks.
There's no way to know how to get to your goal without taking a close look at where you are now. Giving your finances a close look will help you feel more in control and put you back on the path to frugal living!
I use categories, then subcategories:
1.) Fixed Expenses:
These are expenses that don’t change from month to month, like: mortgage, rent, property taxes, cable bill, car payment, insurance.
You can then break these down into 2 subcategories.
- Optional expenses
2.) Variable Expenses:
These expenses can be adapted to fit your financial situation, and sometimes even eliminated if necessary (obviously the need for things like food can’t be eliminated, but you can spend more or less money when adjustments are needed): food, utilities, clothing, gasoline, entertainment.
Again, we can break these into subcategories based on how vital they are.
- Optional expenses
All of your spending will fall into these categories and subcategories.
Now please don’t misunderstand. There’s absolutely nothing wrong with a little bit of luxury spending that you’ve budgeted for so that it doesn’t put you behind on necessary spending.
Now, establish your minimum for living expenses.
For this calculation, add up your fixed necessities. This is the amount you need to keep a roof over your head, your car in the driveway, and any other regular payments that you make to keep those two things going.
Then add up your variable necessities. There’s some wiggle room here, because we can always dial back our groceries, the amount that we drive our vehicles, etc., but we have to add some of this in to our calculations.
So in a financial worst case scenario, this is the minimum amount of money that you need to maintain some semblance of your current lifestyle. This amount needs to be set aside each month before another penny is spent. Everything you have on top of this is gravy.
How do you keep track of your daily expenses? Do you have a number for your absolute monthly necessities or do you just pay as you go without tracking it?