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step 4 – reduce expenses

It’s typically easier for you to reduce your expenses than to increase your income. If you want to improve your balance or budget, you also need to cut your spending. It’s important to go through each and every item and examine where potential optimization opportunities may lie. Every saving you make in this step and every increase in your income from the third step can be implemented to benefit your savings rate. Therefore, it’s crucial that you consistently adhere to your own planning. If you ever feel like giving up, revisit the content of the first step and reconsider your decision to change something about your financial situation. If you’ve made it this far, the next steps will be very easy for you.

Once you’ve calculated your actual budget in the second step when determining the balance, it’s now time to closely examine and, if possible, reduce your spending budget. Since your budget per category is nothing more than your own plan for how much you can spend, you now have the power to decide how much you want to spend, before (!) the month begins. Note down this plan budget next to your actual budget in your table. When you regularly track your expenses, you can then check at the end of the month if the plan was realistic and successful for you.

No matter which category you target with your budget-cutting efforts, there are potential savings in almost every one of your expense items. For the following categories, the receipts, invoices, and payment information gathered in the second step will also be helpful. Collect the relevant documents for each category, examine all possible savings opportunities, and ask yourself the fundamental questions: “Was this purchase really necessary?” or “Could I have done without it altogether?”