Getting your personal finances under control – No. 2

We all have expenses that need to be met in order to live, including food, housing, clothing and transport. But many of us spend unnecessarily on “other stuff”. This is what we call discretionary spending and it often consumes most, if not all, of our surplus income.

Start by setting a budget of known fixed costs, and then allow for some discretionary spending. Look back over past bills and identify your fixed expenses. Bills for fixed expenses often arrive at irregular intervals. A phone bill might arrive once each month or once each quarter, but you might be paid weekly or fortnightly.

Expenses should be totaled for a full year, and then divided by the number of pay days to work out how much needs to be set aside out of each pay to cover bills as they arise.