If you already dont't know, a few months back, I found myslef sinking in a big debt (see prologue). Thanks to online records and excel, the presented pie graph shows back-of-the-envelope accounting of my expenses for the last two years. Although I didn’t start debtfree two years ago, I saw my debt slowly ballooning in my monthly credit card statements to near $30, 000.
My major expense for last two years was housing at 40%. According to National realtor’s association, the average housing expense is 28-35% of income for year 2006-2008 in the United States. My expenses are reasonable considering I am a single and live in an urban setting.
My second major expense was restaurants and bar at 20%, about a half of my housing expense. No-brainer here, I definitely need to cut down my gourmet habit. Since I consider dining out as my entertainment needs (see my post on Need vs. Want), I don’t want to completely forgo it. However, I need to limit it within my entertainment budget. One of my third major expense was interest payment, which can be definitely reduce to zero without sacrificing any emotional needs. Among my fourth expense was electronics at 6%. I upgraded couple of electronics in last two years and I admit to splurging unnecessarily. I recognize that I need to be vigilant about my electronics budget and limit it in terms of productivity rather than for its coolness factor.
After doing this simple accounting of my expenses, I have evidence-based knowledge of my major expenses and clue to root cause of my debt. In traditional twelve-step program, isn't recognizing root of your problem is one of the first steps?
After doing this simple accounting of my expenses, I have evidence-based knowledge of my major expenses and clue to root cause of my debt. In traditional twelve-step program, isn't recognizing root of your problem is one of the first steps?
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