In the previous exercise, we have identified all costs and all income and now have a clear picture of the current situation. Using this information, the budget we set will, in effect, be an overview of how we live our lives from this point on. There will be certain rules that we have to stick with, but we will know that sticking to the rules will allow us to achieve our future financial goals.
The next part of the process is a little more painful and certainly more laborious than the last, but nevertheless must be done. Begin with the easy stuff first. This is the middle section on the budget sheet, i.e.:
- motoring expenses;
- food and housekeeping;
- miscellaneous goods and services;
- personal and leisure;
- sundries and emergencies.
There will be lots of low hanging fruit here (easy savings to be made).
For example, let's say your daily expenditure diary reveals that on your commute to work you buy a newspaper at the railway station and a coffee while you wait for the train. You buy lunch at the deli around the corner, but go to the local pub for a sit down lunch and a drink on a Friday. You have a drink with colleagues after work on average 2 nights a week and buy an evening paper to read on the train on the way back from work. This is what this expenditure looks like over the week: