Your Expenses

The next step is to make a list of your expenses.

Your needs, or necessary expenses, can be either fixed or variable:

  • Fixed expenses include items such as rent, auto, or student loans that must be paid each month. The amount is generally the same for each payment, and you're often obligated to pay because you have a contract or other agreement. You should probably include basic utilities here, as well as basic phone service.
  • Variable expenses include food, clothing, and transportation that can and often do change from month to month. It's usually easier to reduce your variable expenses than your fixed ones.
  • Some fixed expenses are due quarterly, semi-annually, or annually, such as taxes or insurance. Don't forget about them.

The other things you spend your money on, but you don't really need are sometimes called your "wants." They're nice to have, but the truth is you can live without them.


If you have to cut expenses to balance your budget, you'll want to consider each of your expenses individually, cutting wants first and then trying to reduce needs.

  • Separate food costs into groceries and meals away from home rather than lumping them together. Eating at home more often is a good way to cut food costs.
  • Don't add cable, cell phone, electric, and water bills together and list them as utilities. Cable and phone bills are areas where you can almost always cut back.
To keep track of where your money is going, record the cash and debit card purchases you make and everything you put on a credit card. You can use a small notebook or PDA. What you discover will probably surprise you. It may also help you get your spending under control.