Gasoline, Groceries and false economies. It’s your call.

What do you need to survive? If you are in debt then where do your limited resources go? What should get priority? As always it depends on your particular circumstances but there are a number of key things to consider. If you are going to get out of debt you need to maintain a basic level of existence. You can’t simply turn off everything and sit at home in the dark eating crackers.

Some things you simply cannot function without. The thing you have to ask yourself is that if you reduce or remove something from your lifestyle will it compromise your ability to function? By function I mean your ability to get up and take positive action to reduce your debt. For example if you decide to reduce your grocery budget right down and you end up living on crackers and cheese then you can be sure that in a short time you won’t have the energy to go take any action. This type of logic is what is commonly referred to as a false economy.

Beware of the false economy

In simple terms a false economy can be defined as some action that you think will save you money in short term but in the long run it actually ends up costing you more. Using the example of eating crackers – this will slash your groceries budget to pieces but in the long run you will end up paying more in a number of ways – trips to the doctor’s, missing days at work, general sluggishness – you get the picture.

With any budget you need to be conscious of the fact that you can overdo the cutting. What happens in a lot of cases is that people tend to have an initial wave of motivation and then draw up a budget that is unrealistic and full of false economies. They cut too deeply into the key essentials. After what is usually a very short period of time life becomes uncomfortable and they become disillusioned and wonder why they can’t stick to the budget.

The whole point of a budget is that it is right for you. It should force you to think about your spending choices but it should not be so hard on you that you won’t stick with it.

There are some things that you will need to maintain and you simply cannot and should not compromise on. Some of the obvious ones are food and transport. The price of gas is rocketing? – So what. You need to get to work. So the price of food is also rocketing? – So what. You need to eat. Health insurance gone through the roof? – So What. You might need it some day soon.

In any budget there are things you can cut back on and there are things you shouldn’t cut back on. Those mentioned above are just some examples of the basic things in life that you need. Notice that cable TV is not mentioned? Or are expensive dinners out. You need to make sure that you don’t blur the lines between what is a necessity and what is a luxury. Take the example of gasoline - I said it was important and that you need it for transport but what I didn’t say is that you also need a top of the range SUV for transport too. There are plenty of ways to cut your expenses without compromising on the basics of life.

With this in mind you need to ask yourself if you are cutting in the wrong place?

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