An important part of any personal finance plan includes careful management of personal expenses. Even people with a high income can run into debt or end up with overdraft fees if care is not taken to manage expenses. In order to properly manage expenses, it is important to have a detailed budget and engage in practices that help make keeping track of monthly or weekly spending easier.
One good place to start trying to manage expenses is to make a list of monthly expenses that do not change. This may include things like rent or mortgage payments, credit card or loan bills, and utilities with bills that are fixed, such as Internet service or gym membership. These are some of the easiest expenses to track, since they do not change from month to month.
For utility and services bills that do change monthly, such as gas or water bills or cell phone bills, try to gather payment statements for the past six months. Looking at recent billing history can allow a person to come up with an average monthly payment on variable but regular bills. Though using an average will not give exact results, it can be helpful for planning a budget. Knowing the average can also help make large deviations from the normal amount more noticeable, so that changes can be enacted if monthly variable bills suddenly jump far above the average.
If a person uses a single or a few simple accounts for flexible expenses, such as food, gas, and entertainment costs, an average of monthly expenses can be gathered by examining the last six months of bank statements. Consider breaking expenses up into categories, such as clothing, food, transportation, and charitable donations. Once the categories are broken down, it becomes easy to see how much of a monthly budget is going to each type of activity.
Once a detailed budget is created, it is important to analyze the data in order to manage expenses. Those who want to be able to save more or pay down a specific debt will need to hunt down areas where expenses can be cut, such as searching out cheaper Internet packages or getting rid of cable television for a few months. Managing expenses requires that every purchase be recorded in a manner that makes it easy to recognize and sort according to the budget; traditionally, recording methods include simply making handwritten lists or using computer spreadsheet programs.
It is now possible to manage expenses through the Internet, via a variety of programs and applications that can track spending. These may require the user to enter all receipts and expenditures, or can even hook directly into a personal bank account and track spending autonomously. For those who need to start keeping a close eye on expenses, using a program that will manage expenses can be extremely helpful.
