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Home Business

Recognizing a Spending Problem

by Ethan
March 15, 2022
in Business
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How Technology Could Save You Money
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In the modern world, we’ve seemingly solved all the simple problems, and are left to figure out the most complex. But one of the first steps towards solving a problem is to recognize it. So without a solid financial education, how does one go about recognizing a spending problem?

Table of Contents

  • Analyzing Your Finances
  • Plan It Out
  • Slash That Budget
  • Go at Your Own Speed

Analyzing Your Finances

Although most of us lack a solid financial education, it’s never too late to start learning. So your first step should be going over your finances with a fine-tooth comb. Go over your bank statements line by line and separate each purchase or expenditure into different categories. Rent, utilities, groceries, eating out, clothing, and entertainment are a few of the most common. After getting them all separated out, you should then put them into one of two categories. Needs, and wants. Rent, electricity and all your other bills are likely needs. Your groceries can often fall somewhere in between, so you should save your receipts and go over those at a later date. During the pandemic, online ordering of take-out foods skyrocketed, and this is likely represented in your bank statements as well, so throw those under the “Want” category along with any entertainment items you might have purchased, like video games or movie tickets. Clothing, while necessary, can oftentimes be an expenditure that can be reduced heavily. If you’re buying new clothes every month, then this can likely go under the “Want” category as well.

Plan It Out

After you’ve fully categorized all of your expenditures, it’s time to take a look at your income and see how it all shakes out. Realistically, if you’ve never made a budget before you likely aren’t putting a whole lot in your savings account, but you should start shooting to put 20% away for a rainy day soon. For now, subtract everything in your “Needs” category from your income. That should leave you with 50% or more of your original income, if you have less, you’re likely living above your means and need to make some major changes. Otherwise, it’s time to take a look at your “Wants” and see how much your average spending leaves you with income-wise. If you’re ending up with close to 0 after subtracting it from your income, it’s time to figure out what you can live without.

Slash That Budget

Now look at your “Wants” and see which one accounts for the majority of your spending. This should always be the first part of your budget you tackle because it will likely be the hardest. For a lot of people, this will undoubtedly be delivery orders, because it’s just so much easier to have ready-to-eat food brought right to your door. But if you’re trying to save money, it’s time to put on your chef’s hat and start cooking for yourself more. Whether you’re ordering burgers, pizzas, or wings, it’s almost always going to be cheaper to cook at home. While it might not taste as good for a month or two, after a while you’ll have both a new hobby and some cooking skills to show for it. Or if your biggest expenses are clothing, it might be time to breathe new life into your old clothes. Learning how to sew can extend the life of your old clothes, and provide a skill that’s handy in emergencies.

Go at Your Own Speed

You don’t have to do this all at once either, for some making a radical change might be the best way to go about it, for others, slow and steady might win the race. But at the end of the day, the goal is for you to have some extra cash to put away and create a solid foundation for your financial education. And after recognizing a spending problem in your life, you’ll be able to take more control over your finances and achieve your financial goals.

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