Personal finance accounts for a wide variety of spending obligations, ranging from daily buys to extended financial commitments. If your circumstances are like those shared by many Britons, dozens of demands pull at your income every month, stripping financial resources faster than you can feed the flow of cash through your home. Where does the money go?
If you haven’t reviewed your finances recently, the answer may surprise you. Although everyone’s circumstances are unique, when put under scrutiny, many households reflect similar spending patterns. If you are due for a financial tune-up or have simply grown curious about your household cash flow, put your finances to the test, including a comprehensive look at your money habits.
Budget review highlights spending patterns
Until you take the time to evaluate your personal spending habits, it is easy to fall into a pattern of making payments, without a good sense of where you money goes. Typically, during flush times, when monthly obligations are met without discomfort, turning a blind eye doesn’t result in financial crisis. When money is tight, on the other hand, looking the other way may lead to conditions you feel immediately. Conducting comprehensive budget review removes the guesswork, shining a light on actual household spending patterns. And with the help of budgeting technology, there is no excuse for falling short.
In all, your personal economy most likely includes far-reaching commitments, involving various types of spending. Recurring monthly installments, for example, represent steady obligations at the core of your budget, calling for ongoing payments. Home mortgages and other established repayment schedules are examples of this type of spending. At the other end of the spectrum, day to day discretionary spending covers everything from clothing to entertainment.
With so many individual spending areas to reconcile, breaking your budget into easily managed categories is the best way to track spending and make subsequent adjustments. Under review, the following categories typically account for a substantial share of personal spending obligations:
1. Household Costs
Your home is your castle, so it is no surprise; a significant share of spending relates to household needs. If you are a home owner, mortgage commitments represent a major budget entry, identifying a big piece of your financial puzzle. In other words, the stakes are high, giving you every possible reason to responsibly manage your mortgage investment. Are rates lower today, than when you took your mortgage? If so, refinancing to a lower rate may result in more affordable payments.
Does your home need accessible improvements, such as landscaping updates, repainting, or a deep interior and exterior cleaning? Enlisting the help of family members and taking-on DIY projects saves substantial sums, when compared to hiring-out these services.
Is insurance cover accurate, reflecting your true needs? You may be able to lower premiums by raising your deductible or bundling house cover with other policies. And if you are not tuned-in to energy saving practices around the house, you are definitely paying too much for your electricity, water and other utility services.
2. Debt Expenses
Without even recognizing its damaging effects, you may be suffering losses related to excessive outstanding debt. Interest, finance fees, membership privileges, account maintenance charges and other expenses related to your use of credit quickly add up – particularly if you carry debt from several creditors, at various rates.
For better results managing credit obligations, use online resources to become an informed credit consumer, educating yourself about available lending options. Ideally, by restructuring your debt and repayment strategy, you’ll settle on a more appropriate form of financing, establishing affordable payback. Flexible, alternative funding solutions such as consolidation loans, for example, can help you lower overall interest and stabilize payments.
3. Leisure Spending
This wide-open category includes several areas of discretionary spending, such as travel, entertainment, dining out, and other forms of recreation. As you examine your spending habits, you may choose to designate subcategories, for an even more accurate look at your financial flow. This type of casual spending serves as one of life’s rich rewards, but left unchecked, leisure spending can grow beyond your ability to pay, straining your financial resources.
When you need to carve savings from your budget, trimming discretionary spending provides immediate results. Although there are countless ways to cut back, the following moves represent a few accessible ideas for paring your leisure spending:
- Dine in
- Travel off-season
- Buy during seasonal sales
- Enjoy free entertainment
With so many demands tugging at your household income, it takes a conscious effort to track your household cash flow. Put under a spotlight, however, your personal spending patterns may surprise you. If you are like many others; controlling leisure spending, household costs and debt obligations will yield immediate improvements to your budget.