Page 23 - Book3E

in which to reduce spending, don’t eliminate them completely. We all need to feel that some of our money is going for things that we enjoy. Variable expenses are another area that can sometimes be reduced by being thrifty. Fixed expenses need to remain on time and paid in full each month as these expenses are usually more critical elements of life and also affect our credit worthiness.
Expenses Defined
Discretionary Expenses: expenses which are optional such as gifts, vacations, or entertainment.
Fixed Expenses: not subject to change or fluctuation; recurring on the same date from year to year.
Variable Expenses: bills that are paid every month but the amounts due are not always the same.
Helps for Improving Your Decision-making
Some people have found that tracking their expenditures each month helps them make permanent changes to their spending habits. They have been motivated to quit things like smoking and playing the lottery. Why? They realized that what they considered to be insignificant expenses actually added up to more than $100 per month. It was the extra $100 a month they were looking for to balance their budget.
Money coach Deborah Knuckey asks people to follow three rules: “Live within their means, take care of their future, and maximize their pleasure.” Living within your means requires that you don’t spend more than you make, taking care of your future is thinking about your financial goals, and maximizing your pleasure could be “sending your kids to college, buying a certain sports car or taking a vacation. It doesn’t have to be frivolous; it just has to be in line with your values.”
Measuring Your Current Progress 15