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How to read your personal expense report

Updated on September 15, 2009

During the week, you should start categorizing your different expenses into categories, such as travel/transport, food, entertainment (this can be further sub-categorized), payments due (like mortgages or rent), and discretionary or miscellaneous to cover those which you can't seem to fit anywhere.

It is also helpful to differentiate between fixed and variable costs of living.

Fixed costs of living includes items such as rent, tuition costs (either yours or your kids), and is usually taken to mean costs that you cannot change within the short term. Variable costs on the other hand is where most of the trimming is done, as these costs can be changed in the short term. Variable costs includes things like clothes or food.

Generally fixed costs you can't do much about, but variable gives you space to trim.
A good way to start is to create a pie chart so you can visually see how much of your budget is taken up by which categories

If you have a few weeks of data, or even a few months, you might also be able to see some seasonal trends. Utility costs would be on a monthly level, so would accomodation and housing. Most people make a difference between budget allowances and monthly bills however. Day to day spending helps you keep an eye to the ground, while monthly payments gives you the larger picture. Using both hand in hand will lead to very good expense management, probably freeing up a sizeable sum of cash for you each month

Since we wish to cut costs, you'll probably want to look first as your short term budget usages. Where do the highest proportion and percentage of your expenditure and spending go to? For some people, a large part of expenses goes to food. For others, shopping will occupy a huge portion of their personal expense report. If you find that your discretionary and miscellaneous spending are taking up a huge part of your expense allowance, you might want to further break down your discretionary spending into something more stratified so you can figure out which part of it is going wrong. Perhaps you might have one too many impulse buys inside that category.

 Once you've identified your largest source of income drain (or allowance drain), you can take focused steps to minimize or mitigate the damage that it does to your wallet. Using the food example again, if you find that you've been spending way too much on food, it probably means you've been eating out once too often. In that case, its probably better to start preparing your own food, or at the very least breakfast. Making your own sandwich, even the night before, will probably give you a good boost in the morning to your day, as well as reducing the amount you would need to eat for your lunch, which is usually more expensive anyway, so you could go for a cheaper lunch.

Following which, you'll probably want to zoom in on the smaller parts and look for stuff that you probably won't need. Maybe you're spending too much on the phone bill? Is there a cheaper phone plan that you can switch to? Things like that should save you a few dozen bucks.

Going through each category one by one, you should be able to slowly slim down your weekly to monthly expenditure. Every dollar saved quickly adds up!

Perhaps you might want to create an expense report

And then for better understanding, you might want to look at an expense report format

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