About Expenditures.

About Expenditures - Money Matters.

This blog post is about expenditures. Income is always followed by expenditure. We cannot save our entire income because expenses are inevitable. We should not allow expenses to mount though, as uncontrolled expenditures hamper savings.

Expenditure Due to Needs.

Expenditures are the result of needs. Human needs are many. Some needs are absolute necessities like food, clothing, shelter, healthcare and education for children.

There are other needs that arise due to changes in lifestyle, economic conditions and social environment. These may not be essential needs, yet people spend on them. Shopping is a natural instinct for many people. A good income encourages spending. Good income is not the only reason why people spend money. Let us see which other factors encourage spending.

Spending Habits.

We spend money on things which we feel is useful to us. If we are obsessed with a product or service, we will buy it, no matter how expensive it is. For most of us, spending is a habit. We cannot stop ourselves from spending.

We spend in three ways.

(1) Spending for needs: We spend for our needs. This is unavoidable. We have to spend money for our daily needs. The most essential needs like food, clothing and medicines are unavoidable and we have to spend on it.

(2) Spending for wishful items: We spend on things we wish to buy. We make plans to purchase something we wish the most. Even if we cannot afford to buy everything that we wish to, we will try to buy at least some of them. This goes on as wishes are endless.

(3) Spending for things we see first time: We spend on things we see for the first time. This could be termed as an unplanned spending. We buy goods the moment we see it. Such purchases are not pre-planned. We buy it because we like the product at first sight. This type of spending is common among tourists.

Unplanned Expenditures.

Unplanned expenditures are caused due to an emergency such as an accident or an illness. When such emergencies occur, expenses sky rocket. Such expenditures take a heavy toll on savings. Such expenditures are unavoidable too. We cannot do much to avoid these expenses once an emergency sets in.

Unplanned expenditures are not limited to accidents or illnesses alone. Hurdles may come out of the blue which may be taxing to our pocket. Often we are left with no option other than to spend. For people who have no money or have less money, an emergency is a nightmare.

Needless Expenditures.

Though most expenditures are unavoidable and have a reason behind it, some of them are needless too. Sometimes people spend unnecessarily for things they don't need at all. This is seen mostly in people who are rich and who have money in excess of their needs. Poor people who are struggling to make the two ends meet will seldom do this. When people spend on things they don't need, they waste their money.

Spending for non-essential purposes drains our savings faster. So many people land up in misery due to this shopping mentality. We can avoid unnecessary expenditures through a planned approach on spending.

Controlling Expenditures.

Controlling expenditures is the only way to build savings if the income is limited. Expenditures come like friends and become overpowering enemies. They come frequently with a friendly face and rob our savings. However, most Expenditures can be controlled through proper planning. Expenditures should not be allowed to rise to unpleasant levels. With proper planning, we can control unnecessary expenditures to a manageable limit. We should know our expenses well in order to control it.

The following points will help in controlling expenditures.

(1) Knowing expenses: We should know what our expenses are; how much we spend everyday. If we have the expenditure data of each and every day, we can easily calculate our total expenditure for the month. By analyzing this data, we can understand how the money was spent. Based on that we can modify our future dealings and control our expenses.

(2) No hasty purchase: We should not buy anything in haste. We should check our stock. We often purchase goods which we already have. This is a common form of expenditure. When we buy things we already have, we create undue expenditure which is a waste of money.

(3) Enquire about price and quality: We should always enquire about the price and the quality of a product or service before buying it. It is a common belief that good quality products have a high price and that products with low price are poor in quality. This notion prompts many people to purchase expensive goods.

(4) Avoid buying temptations: We should not be persuaded by temptations for buying anything that we come across. Some people can afford to buy what they wish to and some people can't. Those who can't afford to spend much should be more careful about spending. We should always prioritize our spending.

(5) Spend from income, not from savings: We should spend from our income, not from our savings. We generally spend from our income but when the expenses exceed our present earnings, we might have to withdraw from our savings. This often happens during emergencies when expenses multiply. When this happens, our savings diminish. When expenses are met partly through savings even when there is no emergency, our savings get wasted.

Controlling expenditure is an ongoing and meticulous process. The money we spend in a day, in a week and on a month on nonessential items or purposes should at least be reduced if we cannot stop it at once.

Expenditures are controllable. Self-discipline is needed to manage expenditures. When we practice to keep expenses under control, we save money for future.

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The previous post was "About Savings".

The next post is "About Debts".

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