If you began this exercise knowing exactly where you stand financially, you’ll have confirmed that you do spend each month what you thought you did, and that you also earn at least as much as, if not more than, you spend. Bravo!
The chances are better, though, that if you’re like many of us, you’ve just confirmed that you spend more than you thought. Quite possibly you also spend more than you earn.
What can you do? You can do one or both of two things. Make more money and/or decide to spend less. Look at each of your categories again, and decide how much in each category you want to spend.
Notice my wording. I didn’t say how much you are allowed to spend. I did not say to spend less. I said, decide how much you want to spend in each category. If you’re spending more than you’re earning, this solution is not about creating limitations. It’s about making decisions—determining what you most want to spend your money on. If you can make more money realistically, without undue stress, in the immediate future (by changing jobs, say, or adding a second job), then you’re in a position where you may be able to earn what you spend and go on living the way you do right now, if you choose to. If you take this route, make sure that the numbers balance Out.
If you’re like most of us, however, more likely you need w decide to spend your money differently. This does not mean that you have to take one drastic action that crimps your pleasures and quality of life, such as getting by with one car when your family needs two. Unrealistic budget cuts, like unrealistic diets, never work. Consider, instead, making the decision to spend $25 to $30 less per month from fifteen or twenty of your spending categories.