The purpose of this topic is to find out where your hard earned money is going and ways to save money out of the budget you created in Lesson 1: Creating a Budget, by reducing costs or eliminating unnecessary bills and/or items. Now that you have your budget put together, you may find you are spending more than your total monthly income in expenses, bills and debt. This is not an uncommon problem and can often be solved with some small reductions to line items.
The most common line items to reduce are non necessities like cable and deluxe cell phone plans, daily items like dining out and clothing, and entertainment items like going to the movies or vacation spending. But before you can start slashing line items, you need to determine where your money is being spent and how much is being spent on what.
The best way of determining this is the 50/30/20 rule. This rule suggests that a solid budget consists of: 50% must have expenses such as food, shelter and clothing; 30% “want” expenses such as entertainment and vacations funds; and 20% savings and debt repayment.
Find out here if you are spending too much. Keep in mind that this is more of a guideline than a rule. But if your numbers don’t match up, you may want to reconsider that NFL Ticket package next year!