Skill #3 Trimming
Skill #3 Trimming
We've already talked about how tracking & targeting go together. So it will come as no surprise that trimming goes with them too!
Trimming your spend is a skill you need to acquire in order to reduce debts and live on less that you earn. Just about every wealth book says save 10% of your take-home, after-tax pay, use 20% to reduce your debts and learn to live on the remaining 70% of your income. Your first goal might be to live on less than 70% of your take-home , after tax pay.
There are several debt reduction strategies that work such as accelerated debt repayments and debt eliminator programmes that get you to list all of your debts and repayment sand eliminate the smallest debts first. But these strategies don't work unless you cut spending.
So using the information you gather from tracking your expenses and the goals you identified in the targeting stage to cut spending in the trim stage
How to trim
Trimming is the skill of cutting back your spending. You will not manage your money effectively until you learn to cut your spending. It doesn't mean becoming excessively frugal. I am talking about reducing spending on things that are a complete waste of money such as exceeding your mobile phone plan.
Trimming requires you to clearly identify where you need to cut back. Start with whatever seems obvious to you right now like socialising, clothes, shopping, doing lunch. You may also need to trim some not so obvious habits like cancelling an unused gym membership.
Exploring your Money Dashboard should have give you a clear picture of where you can trim.
Here's my challenge to you. Can you answer the following questions?
- Where do you obviously need to cut spending in the next 90 days?
- What needs eliminating all together
- Get a list of your bills and check if any of these could be renegotiated? As an exercise call one of your suppliers and tell them you'dl like to find ways to reduce your energey bill. Check if they can offer you a better rate or tariff
- What things do you buy right now that you know you actually don't need?
Once you have clear goals you can use Money Dashboard to help you achieve them. If you've identified you spend £200 a month on takeways and need to spend less, set yourself a maximum amount to spend - say £100 - and then create a budget tracker so you can even more easily track your spend & stop if it looks like you are going to overspend.