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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.
As the economies of the world take hit after hit, it’s not a far stretch to believe that it could also happen here. Michael Snyder recently issued a “red alert” for the second half of this year with regard to our economy. We’ve been watching as the price of every single item in Greece has a 23% tax added to the top while wages and pensions are cut by as much as 40%. In Venezuela, basic goods like toilet paper and laundry soap are increasingly hard to come by and outrageously expensive if you can find them. While many believe it can’t happen here, we’d all have to agree that getting a job – a good one, not minimum wage – and keeping it, is far more difficult than it used to be. As well, prices are skyrocketing due to droughts on one side of the country, increased fuel prices everywhere, and floods on the other side of the country.
After moving and incurring some unexpected expenses, I had to sit down and take another look at my finances. My expenses have changed because I’m in a different house, so I had to take this into consideration and completely revamp my current budget. But it doesn’t take a move from the suburbs to a farm to change your expenses – many times, things start creeping up so incrementally we don’t even realize it’s happened.
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.
It’s vital to note every single dime you spend. Like a leaky faucet in a bathroom few people use, it’s those tiny but consistent drips that add up to an astonishing amount of gallons of waste.
Now, organize your spending into categories.
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.
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.
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. We get new clothes, take vacations, and go out to dinner from time to time – you just have to make sure the spending works within the confines of your budget.
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.
What can you cut without making much of a difference in your lifestyle?
Oftentimes you’ll immediately identify numerous ways you can reduce your spending without making any major changes whatsoever. Perhaps it’s something small like taking your coffee with you in the morning instead of going through the drive-thru at Starbucks. Maybe you can switch from cable to Netflix. Almost none of these will change the quality of your life in any substantial way, but they can add up to a great deal of money saved over the course of the year.
One mistake I often see when people are taking charge of their budgets is that they discount the small changes as not worthwhile. But really, I believe it’s the small changes that can make the biggest differences because with consistency they add up to a pretty big sum. Check out this article on small changes that result in big savings.
Not only that, but getting into the mindset of choosing the most frugal option can go a long way towards changing your life. When you can make a game from saving money, you learn to reduce waste, be more creative, and think outside of the “normal” parameters. When my oldest girl was a newborn and my husband lost his job, I stumbled upon The Tightwad Gazette books at the library. Amy Dacyczyn’s common sense approach to frugality was a life-changing lesson that has stuck with me through 20 years of the financial roller coaster of life. (If you haven’t read these books, I strongly recommend that you do – her series has been combined into one giant compendium of thrift that every person should have on the bookshelf.)
What could you cut if you needed to make a more dramatic reduction?
Looking at your list of necessities, this baseline amount is for maintaining your current lifestyle. But what if things REALLY fell apart? What if there simply wasn’t enough money to keep living the way you have been?
That’s when you have to rethink your necessities. And if you have a clear picture of your finances ahead of belt-tightening time, it’s going to be a lot easier to do this when times are tough.
Here are some cuts to consider:
Of course, this isn’t a comprehensive list – when you look at your personal expenditures, other ideas will present themselves.
It turns out, money actually CAN buy happiness.
Being frugal doesn’t have to be a sentence to a grim reality. When you relieve the financial pressure, you’ll be amazed at how much brighter your outlook becomes. When you “need” less, you will be happy with the simple things. The peace that comes from financial security can’t be matched by any number of expensive herbal calming teas, pricey gym memberships, tropical beach vacations, or meditation classes.
Money actually can buy happiness (well, peace of mind, anyway) – but it’s the money you DON’T spend that buys it.
Recommended Reading:
The The Total Money Makeover: A Proven Plan for Financial Fitness
The Pantry Primer: A Prepper’s Guide to Whole Food on a Half-Price Budget
Daisy Luther is a freelance writer and editor who lives in a small village in the Pacific Northwestern area of the United States. She is the author ofThe Pantry Primer: How to Build a One Year Food Supply in Three Months. On her website, The Organic Prepper, Daisy writes about healthy prepping, homesteading adventures, and the pursuit of liberty and food freedom. Daisy is a co-founder of the website Nutritional Anarchy, which focuses on resistance through food self-sufficiency. Daisy’s articles are widely republished throughout alternative media. You can follow her on Facebook, Pinterest, and Twitter, and you can email her at [email protected]
The article It’s Time For A Personal Audit Of Your Frugal Living Budget published by TheSleuthJournal – Real News Without Synthetics