Reviewing your expenses

Deciding what is a necessity on your list of expenses and what is  luxury requires one to be very honest with oneself.  There are the "needs" and then there are mere "wants".  Our needs are very basic: shelter, food and clothing.

Shelter

The size of the shelter can quickly move from being a "need" to being a "want".  How much house do you really need?  What will suffice to meet your basic shelter needs? Before the "Great Recession" many people bought more house than they could afford.  Some were able to refinance; others were able to take advantage of government programs to avoid foreclosure; and others could not avoid losing the homes.  It is always advisable to review mortgage or rent at every life changing event. For those renting always remember your rent should never be more 25% of your gross income.  Buying a home is a huge step - while beneficial it must be done after careful consideration and preparation.  The rate you qualify for your mortgage is equally as important as knowing if your home will meet you and your family's needs over a long period of time. 

http://www.bankrate.com/apps/mortgage-app/

Clothing

Same concept applies to clothing - yes you do not need to compete with Carrie Bradshaw of "Sex and the City" for Manolos.  Or for those of us who are little older - completing with Imelda Marcos.  There are ways to dress well without breaking the bank. One can definitely do with less clothing than what the average person has in their wardrobe. You do not need to take advantage of every sale or offer of a discount that is out there.  Do not go "window shopping" or if you do it as a past-time then do not have purse/wallet with you. Try and limited you spending on clothes to 4-8% of your income.  Again planning is important to curb excessive spending.

Food

Aim to spend between 15 - 25% on groceries.  Having a grocery list before you leave home will help to buy only what you need.  Try planning your meals ahead of time so that your grocery list contains things that you really need.  Another thing that I always find works for me is to shop for food on a full stomach.  

Since meat is expensive increasing fruits and vegetables is helpful in reducing the amount of money you spend on food monthly.  Using vacuum packaging before freezing or refrigeration will go a long way toward reducing spoilage thereby saving you money in the long run.  

Many of us like to eat out but most do not have a budget for this.  If you use your credit cards to pay, then try looking back three months to see how much you are spending.  Alternatively you can begin now and for the next two months monitor your spending on what you spend when you eat out.