Techniques that really improve your finances: Reducing your expenses

I like to compare financial growth with loosing/putting on weight. If you eat more than you need, you will put on weight. If you eat less than your body burns, you will usually lose weight. 

So, actually it is really easy. The first thing you need to do to become wealthy is this: 

Stop spending mindlessly. 

To stop spending all together is very hard and not many people would want to live like a homeless, therefore I understand that  you still need to eat and pay your rent or gas/transportation, etc... - but please do stop spending all the time for things that are not really necessary.

How can we do that? Keeping your money firstly and fore-mostly means to decrease your expenses. Therefore the first thing to do is to look closely at our expenses. 

Best technique to reduce your expenses

To be in total control of my expenses, I use an old school notebook and a pen. Always ready, always available. Then I write down every day exactly what I spent. The notebook can travel with me or simply stay at home. Every time I get back from the shops I write down what it really cost.

This takes a bit of discipline, I agree. But the benefit is huge. Suddenly you will see what ridiculous amounts you waste for certain things that are not a necessity. Just save all the receipts and do it at least every evening, if not more often or let the notebook travel with you. There are apps for this as well which you can use, in case that is more your style.


I use the good old manual notebook because:
- it is always ready and handy
- it stays on the kitchen table, just where I need it after coming home
- easy to control and make free hand notes
- no need to think, just jot down
- free text writing is faster




How about credit card spending? Write that down as well when you shop online or use your card as if it was a normal expense. To control the credit function even better, you could only spend from a separate account or prepay a certain amount onto your cards for a certain time frame. Like this you will know how much you allow yourself to spend until 1. of July for example and make sure not to top up your card before that. 


Ok whats next?
I always categorize them. Example of what I write into my notebook:
06.04. Food/Household  9.76
06.04 Bus 1.70
08.04. Utility bill 88.60

I use categories instead of only writing the total amount. At the end of each week I summarize and I can see how much I have spend. I would usually agree on these categories: Food and household needs, Transportation, Utility and Rent, Going out, Sports activities, Gifts, Hosting/Domain bills, Phone expenses, Therapy/Medicine/Health, etc... The possibilities are endless.


What, I have to do this each week??? 
Yes. Because you will be able to compare the weeks much better and (adjust much faster) and it takes a bit longer to calculate the entire month. But do as you wish if monthly is more your thing, go ahead. 


Now how should that help to reduce expenses? 
By merely seeing in which category you are using alot of cash, you will automatically adjust. You will be astonished on how much you spend on phone or transportation cost, or on health or going out which was not really necessary. 

This has helped me tremendously to have my spending's under control and I hope it helps you too.  




More money saving tips on here.

 The "buy nothing new" challenge here 

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