Proverbs 13:18 – ‘He who ignores discipline comes to poverty and shame, but whoever heeds correction is honoured.’
It’s quite possible that some people can turn their finances around simply by cutting back on what they spend. There are many people who fall into debt because they spend more than they earn. The simple math is that if you consistently spend $500 a week, but only bring home $400, then you are short $100 a week. In a year, you’ve accumulated more than $5,000 in debt. This is huge when you consider the inability to repay it!
Our budget is one tool we can greatly use to determine where we can cut back on spending. Other tools we can use are our weekly/fortnightly/monthly shopping dockets or a spending diary. In this, the idea is that you list every item you purchase over a 30 day period and how much it costs.
It is quite possible that you’re spending a sum of money where you felt you were only spending a small amount. For example, a $3.00 coffee at work results in $15 for the week or $720 for a 48 week working year. (I don’t know about you, but $720 would cover more than one of my fortnightly mortgage repayments!) I’m not saying that you should forfeit the coffee, but when you consider the annual amount you spend on it, you may question if you would like to spend that money elsewhere. And until you do make use of it, it can be sitting in savings. (Are you suddenly thinking you can save an extra $15/week? Great!)
Seeing how much you spend and on what can help you make informed decisions. Firstly, you could total the amount you spend on things that you don’t need. Examples of things that you may buy that aren’t necessary include desserts, takeaway food, jewellery, extra clothes or shoes, books. If they are things that are for your sole enjoyment or entertainment, then perhaps you can consider cutting back or forfeiting them for a set period of time. Then, invest this money elsewhere where it’ll generate a return.
Some items that you buy, it may be possible to get them cheaper. Are there things on your monthly list that you bought more than once? Can you buy these in bulk to save? Try this and see how much your spending is decreased by.
It is a good challenge to assess your budget and determine if there are areas where you can decrease your spending. If you are able to do this, it means you can save more, give more, pay off any debt/s quicker and potentially invest more. Over the long term, this can put you in a much better financial situation where you can consider spending more on things you want rather than need.
It is my prayer for you:
- That you will truly appreciate the difference between wants and needs, but that you won’t feel guilty about buying things you enjoy but don’t need.
- That you will recognise areas where you can decrease your spending and so improve your financial situation.
- That you will be diligent in cutting back so that you can invest your finances in another area that will benefit your future wealth.
Lord I thank you that you have provided me with tools to assess my finances wisely. Help me to be diligent in assessing where I utilise my money and to recognise areas where I can implement change for the better.
Create a spending diary. Find a notepad or book that you can write in for a 30 day period. Make a note of every thing that you buy and how much it has cost you. At the end of this period, highlight the items you feel you can cut back on or purchase cheaper elsewhere. Do it!