We're all seeing the increased prices around us caused by continuing inflation.  It means we're getting less bang for our buck!  A dollar today is not worth as much as a dollar tomorrow! Basically our money does not go as far as it used to and it's painful!

So what should you be doing?  Well one of the first things is to see where you can save money.  But don't just say I'll ditch the daily cappuccino and I'll be fine.  You need to work out how much you are spending and then you can see where you can make the biggest savings.

So you're going to need to record all your outgoings.  It's boring, I know, but trust me it's the only way to come up with a personal budget that you can stick to.  Let's get started:

1. Record your Expenses

Take a look at your bank and credit card accounts.  This is going to show you what you're spending each month.  Take a look and write it down somewhere (a spreadsheet is ideal, there are also some apps out there, but paper is fine as well) using some basic categories: food, heating, fuel for car, health insurance, property taxes, online subscriptions, leisure activities etc. It's likely that just the act of finding out what you are spending each month will shock you a bit and show you that you're probably spending more than you thought. 

Once it's all documented under your nice categories then go through each expense and label it either non discretionary (you have to spend it 'must have') or discretionary (you don't have to spend it 'nice to have').  Now be strong with yourself here, even if you put something down as discretionary it doesn't mean you need to get rid of it, it just means that your brain will be in the right thinking space to see whether there are cheaper options or if you can reduce it.

2. Look for quick Wins

Now if you've written everything down as per Step 1 you have probably already spotted some quick wins.  These are normally subscriptions for things that you no longer use and hadn't realised you were still paying for.  If you haven't, keep looking, there will be some in there somewhere: a streaming service you no longer use, magazines that don't get read, gym payments though you haven't been in a year etc.  Isn't it interesting how us humans work. We think that just buying a gym membership will make us fitter, like when you buy a book off Amazon you are automatically smarter.  And don't go looking at stuff saying "oh I should use that"  that's the opposite of what we're trying to do here remember. 

3. 'Nice to have' review

So you've hopefully had a couple of quick wins (feels good right?).  Now go through that list of discretionary items and be ruthless, could you go without them or can you cut back. It might be a good time to stop smoking, you'll save a fortune and your health will be better.  Do you really need to buy two coffees a day, take one from home in the morning and use the office coffee machine.  Ok so it's not as nice so maybe the middle ground is 3 coffees a week?  Do you really need Netflix, Prime Video, Disney+, Paramount and Hulu?   

You look great anyway so do you need to spend all that money on beauty treatments and hair products, are there cheaper alternatives you could use?  Gasoline (petrol) is expensive, are all your trips required or can you cut back on some?  If you drive to work can you car share or is there a cheaper public transport option here.  Do you need all of those clothes you're buying?  Can you reduce the number of purchases or reduce the spend by buying used on ebay or similar.  Oh and stop buying gadgets, they are a fad and always go out of date.

You get the idea, go through each item and question it. You decide, it's your money remember.  If you have a partner, even better, you can question them together and think creatively about ways to cut back.  Don't argue though, I'd be upset if I thought I'd caused that.  But maybe it was coming anyway!

3. 'Must have' review

You're feeling good about the list of things you can cut back on from the 'nice to have' list and now you're thinking how can I possibly cut back on the 'must haves', what is this idiot asking? Well the trick here is not to remove them (after all you don't think you can), it's to reduce them. 

For example you need insurance for your car, health, house, pet etc. but are you getting the best deal and/or are you paying for some extras that you don't need.  Now if you thought Step 1 was boring then the thought of looking through your insurance documents will have you wanting to bang your head against a wall.  But, FEAR NOT, we are going to do this in a phased way.   Start by looking at the renewal dates on your policies.  Some might be expiring in a months time and some might not be for another year.  Focus on the ones expiring in the next 6 months and see if you are currently paying for any extras that you don't need (try to cancel them) and as the policies come up for renewal shop around and get the best quote.

Food is obviously a big 'must have', but do you need to buy the items you are currently buying or are their cheaper alternatives available.  You could switch stores or buy more generic products.  Making your own food is cheaper than eating out and making your own food in large portions often works out cheaper as well.  So cook up a large pot and you can freeze multiple meals.    

As you go through the 'must have' list try and wear the hat of the stingiest person you know (metaphorically not literally).  If you do that then you'll see that maybe you don't need the most expensive pick up truck you just need something to get you from A to B and you can save money by trading down (plus it will use less gas/petrol as well so a double whammy!).  Maybe you can raise the temperature of your aircon by a couple of degrees and lower the temperature that your heating kicks in at.  There are lots of useful little hacks if you look.

4. Sell Stuff

You probably have had many hobbies over the years and collected all the associated stuff. Some you may still do and some you're going to 'get back to' at some point.  Let's be honest, you're probably not going to 'get back to' things. So think about things that you no longer need and sell them: golf clubs, gym equipment, skis, cameras, bikes etc.  They'll probably be worth more now than in the future.

Think broadly here.  People will seemingly buy anything on Ebay, so what else do you have that no longer has value to you but may to other people: shoes, clothes, kiddy stuff, garden tools, children etc. (ok the last one was a joke, just checking you're still reading).

5. Make Savings work hard

Now that you've managed to reduce your monthly outgoings what do you do with any money you have leftover? Well save it of course. Again shopping around is key here, make sure you get the best savings interest rate that you can.  If you already have some savings, combine them so you get the best savings rate.

You should also be saving for the long term: kids college fees, retirement and things like that.  But that's the subject of a different article. 

6. Reward Yourself

Once you get the saving habit you will want to stick to it, being thrifty will make you feel good.  You know only spending what you need to and putting your other hard earned cash to work makes sense.

BUT you're human and you may lapse.  So make sure you have set some money aside to reward yourself for being a super motivated saver.  An extra coffee here and there, maybe less wine overall but better quality.  You decide you're the boss of you.

USEFUL LINKS: How the Rich Get Richer, What is Inflation?, Are Central Banks Being Honest

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