Sorting Out Your Expenses

If you ever set out to clear your house of unwanted things, you probably used or at least heard of the “box” or “pile” method. In essence, you’re forced to review everything you touch in a particular area of the house and categorize it based on what should happen with the item. Typically, the piles go something like this:

• Throw it out
• Donate it
• Try to sell it
• Not sure yet
• Definitely keep it

The idea is to get rid of unnecessary baggage quickly and move on to dealing only with the definite and unsure piles. The rest is no longer applicable in your life and disappears.

Sorting Your Budget

I think we could use this kind of house cleaning every so often to keep our budgets in tip-top shape. Pull out your latest budget, last month’s spending, or any kind of report where you can clearly see how you spend your money.

Start going down the list, item by item, and make a note of whether it falls into any one of the categories you’ve picked out for your sort. Some suggested ideas include:

• I definitely need to spend money here.
• I’m not sure. If extra money’s available, it’s a possibility.
• I need to have someone else pay for this.
• I don’t need this anymore. Cancel or remove.
• This money could be better spent by using it for…
• I spend too much here and need to reduce it.

Notice that we’re not strictly speaking about needs or wants. For example, you might decide that you spend too much on rent and need to find a cheaper place, even though the item is a need. Or, you might decide that spending money on sports equipment is a must for you, even though it’s clearly a “want.”

The idea of sorting your expenses is not to judge your budget against a standard, but to evaluate it based on what you need from your life and your money right now.

Doing this often is the only must. Like spring cleaning, no matter how well-kept your house is during the year, dirt always piles up behind the bookshelf and under the fridge. Only a focused effort on the details we don’t pay attention to during daily life will ensure that you’ve got all your basis covered.

Have you ever tried this kind of exercise?