Where to Cut When You Need Money

Mon, May 20, 2013

Budgeting, Financial Advice

Many of us are currently feeling the strain when it comes to living expenses and paying the bills and when you see that even governments around the world as well as the in U.S are cutting their spending, you know that the drive to save cash is something a lot of us are having to do.

Sometimes our personal finances can take a big hit with an unexpected bill or expense that we didn’t see coming and very often people make cuts in the wrong areas as a knee jerk reaction to what might be a temporary financial crisis.

Take stock

If you need to cut your spending urgently to free up some much needed cash, it is always advisable to try not to hit the panic button straight away but first take stock of your situation as calmly as possible. Start by writing out a list of your personal expenditure so that you can get a clear picture of where your money actually goes, and be honest about it, there is not point writing down a list that only has some of your spending detailed on it.



By writing down a comprehensive list of what you spend your money on, you can then look to prioritize what you might be able to cut back on or perhaps cut out altogether if you need to. Debts like your rent or mortgage are of course non-negotiable and have to be paid, but look at your discretionary spending such as a regular once a week trip out to the local pizza restaurant or the number of video rentals or downloads you pay for every week or month.


Credit cards

Using your credit card to get yourself out of a fix is not a great idea and one to avoid if you can help it as the interest rate that you pay will probably mean that you are adding to your debt levels in the long term just for the sake of a short term fix.


Plan of action

Work out how much cash you need to raise and then write out a plan of action, listing what expenses or treats that you could do without in order to save some money towards the cash target. Most people are shocked when they add up how they spend in a month on small purchases like a cappuccino on their way to work each day and a sandwich at lunchtime from the deli. There is nothing wrong with taking a flask of coffee and your own sandwiches to work to save some money and very often small savings or sacrifices like this add up to big amounts of cash in your bank account over the space of a month or too.


Borrowing money

It is not a great idea to borrow money to get yourself out of a hole but in some circumstances it could help you to get your financial house in order and help you stay on track for the future. If you are able to see some areas where you afford to cut down your spending such as nights out, reducing your cable subscription and anything else that you know you could do without, then you may be able to free up enough cash each month to show your bank or a lender that you could pay back a loan, but it is generally much better advice to try and take stock of your position, see where you can make some savings and watch your bank account build up sufficiently as a result.

Running short of cash or needing some money to cover a bill is one of the bumps in the road that we all have to negotiate at some point so try not to panic, which could result in you making cuts in the wrong areas. Instead be creative and honest with yourself about what you spend and you could well find that a few sacrifices here and there will help you to free up the cash you need.


Gillian Kearney is a personal finance consultant. She enjoys teaching her clients and readers how to become ‘recession-proof’. Visit the Monkey.co.uk website to learn more.


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