What Non-Essentials are You Spending a Lot On? When you are not living within your means, the first thing to examine are things that you do not really need. Unlike fixed expenses (essentials like rent, utilities, and other payments) which remain the same each month, discretionary expenses are nonessential and are easier to cut back on.

• Ask yourself: Am I spending too much money on these discretionary expenses? Are you finding it difficult to pay bills because of going on vacation, for instance? Or do you really need the designer shoes or the latest gaming system?
• Check for things you do not use. This may mean a gaming site subscription you have not used in months, or a gym you do not go to, or cancelling cable because you watch everything online.
• There are admittedly a few grey areas, such as a gym membership or a nice wardrobe that may be necessary for your professional career. These may not need cutting, but worth scrutinizing.
  2

  Review your spending for the past quarter (three-month period). Look at your credit card and bank statements as well as cash expenditures to see where your money goes. Take note of even little things like a coffee, a postage stamp, or a meal on the go.

  • You may be surprised by how much you end up spending in just one week or in one month.
  • If possible, look at data compiled over the course of a year. Most financial planners would review entire year of expenditures before making recommendations.
  • Discretionary expenses can end up taking up a large percentage of your pay cheque or allowance. Recording them will give you a sense of where you can cut back on your spending.
  • Take note of how much you spend on wants versus needs (for example, drinks at a bar versus groceries for the week).
  • Figure out what percentage of your expenses are fixed versus discretionary. Fixed expenses remain the same each month, while discretionary expenses are malleable.
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  Keep your receipts. This is a good way to track how much you spend on certain things every day. Rather than toss your receipts, keep them so you can record exactly how much you spent on an item or a meal. This way, if you end up overspending for the month, you can pinpoint exactly when and where you spent your money.

  • Try to use less cash and instead use your credit or debit card, which can be tracked. Credit card balances should be paid in full each month if possible.
  4

  Use a Budget Planner to assess your spending. A Budget Planner is a program that calculates how much your expenses are for a year and how much your income will be for a year. It will then tell you how much you can afford to spend in a given year, based on your expenses.

  • Ask yourself: Do I spend more than I earn? If you are dipping into your savings to pay for your rent every month or using your credit card to pay for shopping sprees every month, you are spending more than you earn. This can only lead to greater debt and less savings. So, be honest about your spending every month and make sure you only spend as much as you earn. This means factoring in money every month for expenses and savings.
  • You can also use budget apps to help track your spending on a day-to-day basis. Download a budget app to your phone and record your purchases right after you make them.