Budget to cut the unnecessary costs

As we live in the grips of the credit crunch and the uncertain future of the economy, cutting down on unnecessary spending should be something that everyone is looking at. Cutting out the unnecessary will allow you to save some money, and, if you are in debt, help you to start climbing out.

The first step to cutting down is to budget. Whether you want to do it on old fashioned pen and paper, or using a state of the art spreadsheet, the principle is the same. Your incomings need to total more than your outgoings. The key to a good budget is to make it a yearly one, since many outgoings, e.g. holidays or Christmas, are only at certain times in the year. Start by writing down any money you receive – wages, benefits, rent from a tenant, etc. Write everything down, even if it is only once or twice a year.

Next, write down all your outgoings – mortgage/ rent, bills, credit cards, car, food, entertainment, satellite TV, presents, etc. Keep going through the list until you are sure you have included absolutely everything that you spend in a year. Assign a total to each item, and then add up all your incomings, and all your outgoings. If your incomings are greater than your outgoings, then you are already in a great position – you have money left over that can be put towards existing debt, or if you are debt free, then can be put into a high interest savings account.

However, if your outgoings show the greater figure, then you have some work to do. First of all consider the incomings. Is there any way you can increase these? Would you consider taking a second job? Can you take in a lodger? Are there any additional benefits you are entitled to? Once these possibilities have been exhausted, it is time to try and cut out the unnecessary spending.

Take each item on your outgoings list in turn, and try to reduce it. Shop around for a better mortgage deal, shop around for better insurance quotes, work out if you can leave the car at home and take public transport a few times a week, consider whether you can live without satellite TV, or that weekly meal out. Shopping bills can often be reduced by buying supermarket own brands, rather than brand names. By systematically trying to cut the cost of every single item on your list, you will be cutting out unnecessary drains on your money, and will hopefully end up with a total that is less than your incomings, allowing you to save!

I always read about saving budget and cost at howisavemoney