Keep it in balance
Balancing the books may take some time but it’s an important part of not spiralling into financial trouble.
If costs rise or income falls, one way to cope financially is to cut back spending in certain areas. Dining out or going to the cinema – the types of spending included in our “entertainment” category – are known as discretionary spending, which are nice to have but not necessary to survive. Holidays and clothing also fits into this type of spending.
The results of this poll echo findings in the second annual ING International Survey on Savings in which 69% of respondents had cut their spending in the last year.
How to choose?
Many people budget by dividing household expenses into groups – or separate “buckets” – for food, housing, transport and other expenses. Known as mental accounting, this method can help us to understand how we make our choices on what to spend on as well as how this way of thinking can lead us to make strange spending cuts.
Research summarised on the Brown University website examines petrol price rises and finds people typically changed petrol buying habits when prices went up rather than cutting back in a different area of spending, such as food. A lesson here is that if prices rise or income falls, it might pay to revise the household budget as a whole because savings in other areas – such as entertainment and travel – could see money moved from one “bucket” to another to help ease the pain.