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How to Budget for Your Household Overhead

Posted by : Premraj | Posted on : Sunday, July 12, 2015

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When we’re trying to get our finances in order, we love the idea of finding ways to never waste disposable income. The truth is that, even if you eliminate all of your discretionary spending–which some people manage to do!–there are still some fixed expenses that are going to eat up some of your income.

These are expenses like housing costs, utility costs, the money you spend on groceries and even the money you spend on basic clothing and personal care needs.

It is important to understand that, even though most of these household and care expenses seem fixed (that’s why they’re called “fixed” after all), there actually is some wiggle room. With some diligence and creativity you can find ways to reduce your spending in these areas and, in this article, we’re going to teach you how to do that.

Step One: Track Your Spending

Before you can figure out where to cut, you need to figure out where you’re spending. The more detailed you can be with this, the better. For example, instead of just noting “I spent $100 on groceries this week,” break down that $100 into categories. How much did you spend on produce? How much on pasta? How much on snacks? And, instead of “my monthly electric bill is usually around $60,” keep track of your power consumption. Every day write down things like “did a load of laundry–half full” and “spent an hour shopping online, on desktop computer.” And, yes, “accidentally left lights on when I left the house.”

The trick, of course, is to not adjust your spending habits so that you look more responsible than you actually are. The more accurate you are (and the more honest!), the more complete the picture of your spending will be.

Step Two: Evaluate Your Spending

When you look at where your grocery money is going, is a lot of it going to produce that you eventually throw out because it goes bad before you use it? Are you spending an exorbitant amount of money on snack foods? How long is your average shower? Are you routinely running the dishwasher on just a couple of plates? What’s working? What needs to change?

Step Three: Create a Plan

Once you’ve evaluated what you’re spending, you can create a plan to make changes and reduce your out of pocket expenses.

The first thing you need to do is look at your data and make a note of all of the waste that is happening. These are going to be the easiest habits to change. For example–if you’re routinely chucking a bunch of wilted or rotted produce into the trash, try shopping for your produce more often during the week.

The harder part is finding ways to adjust your spending so that your fixed costs can come down.

First, look at your bills. Are you being overcharged anywhere? Can you switch providers? In deregulated markets, shopping around for a new power provider can reduce energy costs significantly. For example, across the border to our north, companies like Just Energy in Alberta track current provider rates and services to help residents find the best deals. The U.S., with a few exceptions is a fixed market (though some states have deregulated their energy industries), so you might not be able to shop around, but you can take steps to make sure that your power provider (or water, gas, cable, phone, etc) isn’t overcharging you.

Now look at your habits. For example, most people can reduce their showering time by quite a lot (giving up long hot showers isn’t as painful as you think). You can switch out your light bulbs for more power-friendly options. Most of you reading this are well versed in the different methods you can use to reduce your power and utility usage, how much you spend on groceries, how much you spend on personal care, etc. The problem isn’t not knowing what to do. The problem is actually remembering to do it.

A Word About Habit Formation

Forming new habits can be incredibly challenging. Entire books have been written on the subject! The one piece of advice we have here is to manage your expectations. You’re not going to be suddenly perfect once you’ve put together your plan. It will take time for habits to become ingrained. Try making one change every week or so, so that it doesn’t feel so shocking to your system and try to be patient with yourself! You don’t have to be perfect right away!

Whatever you do, don’t give up! It will take time, but if you keep working, you may not be able to eliminate your fixed spending entirely but you can cut it back by quite a lot!

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