Incremental Savings add-up Over Time

Just as we don’t spend an entire year’s budget in a single shot, we shouldn’t expect to land a whole year’s worth of savings in just one spending encounter.  Instead, look at small savings as incremental entries into a grander pool of prudent money management.  Within every personal budget, savvy consumers find room to trim costs, leading to significant savings over time.  Looking at your financial picture is easiest when small chunks are digested individually, illuminating anomalies and patterns.  Naturally, your year’s spending can be divided into time-based bits, broken into months, weeks, or individual days. 

For budgeting purposes, monthly entries make sense, because many personal billing cycles are built around the twelve-month calendar.  As a cross reference, expenses can also be broken down into budget categories representing your primary areas of spending.  Costs like entertainment, food, housing, clothes, school expenses, and other spending categories are easily tracked when divided into their own unique classes.  Superimposing your annual budget, broken into months, on top of your category budget, divided into spending classes, illuminates your monthly spending patterns.

Once established, operating costs can be analyzed with an eye toward savings, allowing opportunities to evaluate each spending category independently.  Looking closely at bills and statements sheds light on areas where costs can be trimmed, resulting in disciplined, incremental monthly savings.

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Recurring Expenses Drive Budgets

Cash flow problems arise from a variety of conditions, ranging from unemployment to seasonal spending spikes. The first step toward successful individual financial management is to assess the fixed costs within your budget.  Mortgage payments, for example, do not change from month to month, so they are easier to anticipate than some other expenses.  These “fixed” costs provide the foundation for family budgets, because they are not going away any time soon, so they might as well be accounted for right off the top each month.  Similarly, car payments are tied to strict repayment schedules, so there are generally no surprises recognizing when car loan payments come due.  The purpose of compiling monthly fixed costs is to determine whether your monthly cash flow is in balance, and identify areas of discretionary spending within your budget.  If you are consistently struggling to keep up with rent payments, for example, it might be time to consider a roommate or a cheaper living arrangement.  Likewise, when car payments are always hovering just beyond your reach, they may be more than you can carry. A payday loan could help you over this tricky period when your income level does not match your level of spending, one or the other must be adjusted to create a sustainable system, otherwise the snowball effect perpetuates the financial shortfall month-to-month.

Discretionary Spending Cuts Lead to Savings

Beyond your fixed monthly payment obligations are those subject to changes across time.  Credit card purchases, for example, accrue only as fast as you make them, comprising spending considered “discretionary”.  In contrast to fixed payments, discretionary spending is left in the hands of each consumer to manage.  Essentially, the funds remaining after your fixed monthly commitments are met represent discretionary funds, channeled as you see fit.  Discretionary spending provides an opportunity to fall prey to consumerism, spending beyond your means; but it also furnishes a prime target for savings each month.  While it is impossible to make the rent payment go away, incidental charges for daily items can be trimmed with disciplined discretionary spending habits.  Within the entertainment category found on your budget breakdown, discretionary spending lies behind many charges.  Television service, while customary and prolific, is not a fixed expense.  Instead, monthly commitments to television providers represent areas for you to cut spending.  Carried across the entire category, entertainment savings hold some of the greatest potential for reducing family budgets.

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