Here’s a great eye-opening exercise for all of you who want to create a secure financial future for yourself and your family. Security begins with getting debt under control, and that begins with getting a clear, honest picture of how your expenses stack up against your income. Until the numbers appear on paper, we often don’t realize what our spending really looks like. I suggest making a detailed spending log from the previous year. I’ve found that before doing this exercise, most people underestimate their average monthly expenses by at least $500 to $1,500. If expenses exceed income, can debt be far behind? For many of us, debt is too big a part of our overall money picture not to give it the respect that it’s due.
 

Here are some tips for trimming your expenses and bringing your financial life back into balance:

Exercise: Trimming Your Expenses

1. Go back over your year’s list of expenses and put a check mark alongside every item on the list that could be adjusted, if need be. Generally, there are three areas that can be trimmed fairly painlessly: luxuries (meals out, recreational expenses, and entertainment); penalty fees (overdue fines on books and videos or late fees on debt payments); services you can perform yourself (housecleaning, laundry, manicures, accounting, and even making your own coffee). Only you know how you’re spending the money you don’t have.
2. Go over the items you’ve checked and choose ten painless changes you could make to your present spending habits. Make a list of these and be as specific as possible (for example, “Wear clothes one more time before taking to the dry cleaner” or “Reduce housecleaning service from once a week to once every other week”).
3. Commit to one month of cutting the expenses you listed. During the month, carry a notebook and every time you would ordinarily spend money on one of the items, jot down the amount you didn’t spend.
4. At the end of the month, add up the total amount of savings for each item and total up your savings for all the items. Multiply by 12 and you have the amount of money you could save each year with these few painless changes in your habits.

You’ll be amazed to see how a few minor changes can really add up. And there are many other ways you can modify your spending habits to decrease your expenses. Once you’ve cut enough so that your income exceeds your expenses, don’t stop! Keep up the expense cutting and use the money you save to eliminate credit card debt, build an emergency fund, and save for long-term goals.