1.3.4 Reduce unnecessary spending

We all have expenses that we can't eliminate or cut back on very much, like food, clothing, housing, transportation and child care. But there are many other expenses that are a matter of choice. These are called discretionary expenses. How many of these discretionary items apply to you?

• bottled water
• restaurant meals
• video games or DVDs
• spa treatments
• impulse buys such as magazines, clothing, jewellery, electronic gadgets
• frequent nights out at a nightclub or pub.

These types of expenses are the extras that you don't really need—and they can sure add up! For example, both of these items will cost you about $1,920 a year:

• a weekly manicure at about $40 each
• lunch out every work day at about $8 a day instead of bringing your own.

You could save nearly the same amount if you spent $5 less a day! What else could you do with that money?

There's nothing wrong with spending on "extras"—if you can afford it. But if you have trouble paying your bills, or finding enough money to save for the future, you may need to reduce your spending until you get your finances back on track. The first thing to do is to look at your discretionary spending and start cutting there.

Definitions

• Discretionary spending: Spending on wants rather than needs; includes items like restaurant meals, video games and concerts
• Impulse spending: Spending decisions that are made on the spur of the moment, as opposed to planned spending decisions