3 Power Tips to Take Control of Your Expenses

When it comes to personal finance, you essentially have two major areas of focus: your income and your expenses.  On the income side, you’re dependent on a number of external factors such as the economy, your employer, your tax rate, your industry, etc.  These external factors can sometimes work against you, making it difficult to make strides in increasing your income in order to improve your financial condition.  On the other hand, your expenses or your spending is for the most part, completely under your control.  Since you control your spending, you can definitely make strides in this area so that you can increase your bottom line or your savings rate.

Photo by qisur via Flickr

Sure, there are scenarios where you can’t control every aspect of your expenses.  For example, maybe you have medical needs that are beyond your control and eat into your income each month.  With that said, the majority of your expenses such as housing, food, entertainment, auto are all adjustable and under your control.

This is a very important aspect of personal finance to understand clearly.  The point is that you can improve your financial life, whether it is by paying off your debt or boosting your savings, by improving on this area that you have complete control over.  The only question is how far you’re willing to take it and whether or not you’re willing to exercise a significant level of control over your expenses.

Control Your Expenses

Housing Expenses

First up, your biggest expense: housing.  Most people spend entirely too much on housing.

Why?

First, the recent real estate bubble created a scenario where way too many people are living beyond their means when it comes to the home they live in.  Second, real estate is very emotional and you can easily get caught up in the idea of living in a certain home despite the large expenses it represents.  Remember, housing is an expense.  Nothing more.  As such, we want to keep it low, just like any other expense.  Take strides today to get yourself in a better position with your residence.  If you need to sell a house at a loss, I say do it.  Get your monthly housing expense under control!

Transportation Expenses

Next on the list is your car or transportation expenses.  It’s crazy that so many of us have large auto payments each month.  It’s time to quit caring about what we drive and get a car that is reliable and nothing more.  Sell your expensive car, pay cash for the next one, and do what you can to keep it moving.  This is an area of people’s lives that far too often results in significant amounts of money lost.

Food and Entertainment

When it comes to food and entertainment, this is all about lifestyle.  How often do you eat at a restaurant each week?  Do you eat out for lunch at work on a regular basis?  It’s time to start controlling how much you spend on eating out.  When it comes to groceries, get more efficient at planning meals and buy only the necessary items for those planned meals.  With regards to entertainment, this is pure discretionary spending.  Cut all of it out of your month if you’re up for it.

These three areas will jump-start the control process of your expenses.  You can get into other areas such as clothing, dry cleaning, etc. but master these three large categories will make a significant impact on your financial life.

Remember, you may not be able to control everything about your income due to a lack of available opportunities, but you can definitely control your spending.  Are you willing to take control and take the road to real wealth in your life?

About the Author

By , on Oct 14, 2011
Kevin
Kevin is the writer behind 20smoney.com. 20smoney.com focuses on aggressive investing, developing income streams, money management and more with advice targeting 20-somethings. You can read more about his pursuits of online income and financial freedom.

Leave Your Comment (8 Comments)

  1. Grate article. very informative thank you for the tips. Thanks for sharing

  2. Great post. I feel the same way: cars, food & entertainment are detrimental to the financial success of individual. If people follow some simple, daily steps to improve their finances the change would be immense.

    If you can save $50 a month on your car (fewer trips, carpooling, ride-sharing, emptying trunk, airing your tires, etc), $15 in food (taking lunch to work a week(peanut-butter jelly sandwich does wonders), and $50 in housing expenses (turning off the light, buying energy efficient stuff, weather proofing the house, etc) Its a total of about $150 a month that can be saved.

    1 year = $1800

    20 years at a 5% Annual Interest (compounded monthly) = 62,200.77

    That’s how much $150 a month would be.

  3. Griff says:

    I agree that those are three great areas to control your spending in. I think it is valuable to focus on these big wins rather than saving ten cents here and there on other things.

  4. Get out of Debt. The debt snowball can give you awesome psychological payoffs, keeping you motivated to stay in the game. It’s not mathematically ideal, but it worked for me (and for many others besides).

  5. Shailesh Ghimire says:

    Definitely agree that its about controlling spending. However, I get so burdened and tired of controlling costs all the time. It frustrates my family. But I agree with your point. Its one of those things you just have to deal with in life and learn to find ways to make it happen.

  6. kt says:

    this was the advice first got when i started reading about finances financial security and investing. so far it has worked in my favor because my finances are not in hell in the here and now and i hope to keep them away. when you really start trimming away things you dont need, it is surprising how little you need to survive and enjoy life. i think life is much easier when finances are in complete order

  7. RJ Weiss says:

    I once asked a friend who spent about a fourth of his income on car payments, if he would would rather have 3 months of vacation each year or a car. His answer was of course the vacation.

    It’s amazing how much we let fixed expenses like car payments, control our lives.

  8. As Dickens wrote over a hundred years ago: “Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.” It is really that simple. People need to resist the urge to splurge and the constant bombardment of advertising urging us to spend well beyond our means. Credit cards are one of the most insidious things invented when in the hands of the undisciplined person.

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