Review your data
Once the month is over, it’s time to look through your expenses and find all possible areas for improvement. Like we said before, categorization of expenses is critical because some of these categories are completely mandatory, for example rent, or electricity bill and there is nothing you can do about them. However, I am sure you have many other expenses that are part of your “joy of life” and you don’t necessarily want to get rid of them. The rest expenses you might want to reconsider and take a different direction with your money. Carefully review each category and decide how much you can really afford to spend. Start with simple things, e.g. I noticed that I was spending considerable amount on taxi rides, so I started to use public transportation and I started to walk to work if the weather allowed. Another cut that I made in my “other expenses” was in the amount spent on coffee. So my fist step was the decision to drink more coffee at home and limit take away coffee, which is quite expensive on the way to the office. This simple step decreased my coffee expenses in half. The more specific your are categorizing your expenses, the more areas for improvement you will have. And finally, you are in big trouble if what spend is more than what you earn.
The next step is planning expenditures for the next month. No need to write down what you can and cannot buy, just place some simple guidelines somewhere in the back of your head. Things like: drink coffee at home, don’t buy more than two beers at a time, don’t use your credit cards to buy some cheap items or an extra pair of shoes at a discount that you are not going to wear, travel by cheap public transport or walk to the office, buy less clothing, and so on.
If you somehow manage to consider these guidelines during the next month, you’ll definitely be able to lower some of your expenses without losing quality of your daily life.
Knowing your personal budgets will help you plan and save on small and unnecessary expenses; of course if you plan to buy something big—like some real estate or a new car, it won’t affect your monthly budgets.
But with careful planning and knowing how much you can afford to spend, and what will be the investment over the years, will make a big difference. Sometimes you think that buying something small here and there will not hurt you, but when you add up everything at the end of the month, you will see that all those small things have turned into one enormous big bill. Personal finance apps are very helpful to see the problem and take the right action, of course, if we don’t forget to put every expense into the app.