Spending more than you earn? Some ideas on how to cut back.

July 22, 2012

1.  Track your expenditures – daily if necessary.  There are many financial software programs out there – my favorite is Quicken for personal finances and Quick Books for business use.  One way to consider the balance between your income and your expenses – take your net cash amount – subtract your fixed expenses (rent, utilities, phone, cable, car payment, loan payments, etc.).  Then the balance remaining is what you have left to use for savings, food, entertainment, etc.  If you have a negative balance after your fixed costs – then you need to find a way to either increase your net income – or reduce your fixed costs.  Otherwise – you will end up in debt or have no way of paying down debt you already have.

2.  Reduce your spending on items that are not needed.  Did you realize that a daily trip to Starbucks could cost you over $1,500 a year?  Eating out for lunch five days a week at work can cost you as much as $1,300 a year?  Hair, nails, pedicures ?  Can they be scaled back a bit?  Eating out – one beverage – such as a soda can cost as much at $4.  A family of four can easily spend as much as $60 – $75 for a meal at Red Robin.  Packing a lunch and eating at home can save you a lot more than you realize.

3.  Commuting costs – try taking the bus or riding your bike.  Gasoline prices are through the roof and are not likely to be coming down any time soon.

4.  Set goals for you and your family – once you have established a goal – it is easier to put a spending plan together for you will achieve it.  Perhaps you set a modest goal of saving $100 a month.  Decide where you will find that money and then save it.  At the end of the year you will be $1200 richer.

5.  Mostly though, I would go back to item 1 – track your spending!  Use a program like Quicken to help you set upa spending plan.  Know where your money is going – once you know where it is going – it can be pretty obvious what you can do to cut back and give yourself a raise.

One of the services I offer is to sit down with you to lay out a plan for tracking and controlling your expenses so that you can reach your financial goals.  Sometimes it can make a big difference to have someone to take a look at what is going on in your financial life and provide direction on the steps you need to take to be successful.  There may be solutions to your situation that you have not considered – that a professional accountant can offer.

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