Budgeting your monthly expenses by categories isa surefire way to ensure that you will save money in the long run. Let’stalk about exactly what this means. In your household budget, you should have alist of categories. They might be set up on a spreadsheet or on a piece oflined paper.At thetop of the list of categories are the most essential payments that must be madeevery month. For example, you can place your mortgage payment, rent, groceries,insurance, daycare, and utilities at the top of the list. Underneath thesemajor recurring expenses, you will have spots for other expenses that recurevery month. These are secondary expenses that could be cut if you had a suddenchange in income, such as a job loss or a reduction in work hours at your job.Examples of secondary expenses are a gym membership, a cell phone plan, a cablebill, and extracurricular activities for the kids.
At thebottom of all of these expenses are discretionary spending categories where youhave some flexibility. You don’t have to take the kids to the Chuck E. Cheeseevery week and spend $30, and you don’t have to send the kids on every fieldtrip with the Cub Scouts or the dance team. Also, sometimes the kids can taketheir lunch instead of buying school lunch. What you have to do is prioritizeso that you have discretionary cash available when needed.
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