Managing personal expenses is not easy, especially if you have limited funds. It’s a battle that needs planning because if you fail to meticulously organize it, you’ll end up with financial setbacks – and that includes a growing debt. So how can you effectively manage your personal expenses? Begin with understanding your expenditures.
You can never make solutions without understanding the problem. If overspending ruins your peace of mind, then you probably fail to understand and study your expenses properly. Identifying and classifying them is the first thing you should do.
The Four Types of Personal Expenses
Fixed Expenses – these are the expenses you incur regularly and having the same amount. (E.g. rent, car loan payment, cable bill)
Variable Expenses – these are the expenses that vary every time you incur them. (E.g. electricity bill, petrol, groceries)
Intermittent Expenses – these are the expenses that you pay once at a certain period (sometimes in a year) and could be in large amounts. (E.g. tuition fees, car repairs, and maintenance, yearly insurance)
Discretionary Expenses – these are unnecessary expenditures. (E.g. eating out, shopping, snacks)
When you understand your spending, it will be easy for you to manage your expenses. These four types of personal expenses will serve as your guide to handle your cash outflows responsibly.
7 Simple Ways to Manage Your Personal Expenses
1. Categorize your expenses. Separate the non-essential from the essential. As mentioned above, you need to identify and classify your expenditure. You can do this by enumerating your spending based on the four types of personal expenses.
2. Create an expense monitoring sheet. It can be very overwhelming if you can’t keep track of your expenses. It may be complicated at the beginning but having an expense monitoring sheet can be very helpful. You’ll never be left behind from your dues, plus you’ll determine which among your expenses need to cut down.
You can use an Excel spreadsheet or a simple notebook, whichever that makes you feel comfortable. You can also use a spending tracker app to monitor your expenditures.
3. Make a projected expenses plan. Create a budget plan projecting your expenses every month (or a week, if you prefer). When you create this plan, you can use the record of your past expenses to estimate the costs you will be spending in the future.
For example, last month you incurred Php7,000 total expenses. That includes the electricity bill of Php1,000, water bill of Php500, rent of Php2,500, and food and various expenses of Php3,000.
You can easily input in your projected expenses plan that for the coming month, you will incur the same amount for the rent, since this is a fixed expense. For the electricity bill, water bill, food, and various expenses, you can make your estimate based on your usage and consumption.
Let’s say you always watch T.V., so increase your projected expenses for the electricity by 5% of your previous bill. That will be Php1,050. Do the same thing with your other variable expenses.
4. Reduce your expenditures by eliminating unnecessary spending and developing alternatives to spending money. This is important if you want to be a responsible spender. Avoid expenses that you don’t really need, like takeaway coffees. If you want to drink coffee, making your own coffee is the best alternative for it.
5. Don’t be an impulsive buyer. Especially when you go to the grocery or your favorite shop. If you really need to go, make a list of things you need to buy and strictly stick with it.
6. Limit your liability and take only the debts that you can afford now. Don’t guaranty yourself that by tomorrow, your income will grow twice its present amount. Be responsible and smart when spending and making decisions.
This best applies to credit cardholders. Keep in mind that your credit cards are not your wallet. To prevent excessive use of your credit cards, remember this: Don’t spend the money you haven’t earned yet.
7. Pay your credit card bills in full every month. Associate this with your spending goal. When you pay your credit card bills and not carrying the balance the next month, you can avoid interest charges and penalties.
Remember that when managing expenses, discipline is the best weapon against any temptations. I know it’s difficult. Especially if the item you’ve been eyeing for a long time is on sale. (Gosh! I know the struggle!) However, when you know your priorities, it will be easy for you to say “no” and walk away from useless spending.
P.S. I hope I helped you somehow to manage your expenses. Do you have another idea on how to handle spending efficiently that I haven’t mentioned here? Let us hear your thoughts and comment below so you can help other readers too.
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