Define your buckets and the categories within each!
You now have a clear understanding of what you have ‘actually’ been spending your money on. This usually raises a few surprises. After getting over the initial shock, it’s usually liberating as you discover areas where you can cut back with a little discipline, self-awareness and not ‘too much’ pain for yourself or your family!
The next step is to decide which categories fit into ‘Grow’, ‘Life’,’ Fun’ and any other buckets that you would like to nominate such as ’Investment expenses’, ‘Kids education’ or ‘Holidays’ or similar.
The more contentious expenditure when determining the bucket, they fit into usually includes categories such as clothing, holidays, household items, eating out (breakfast, lunch and dinner), coffee, car (our greatest depreciating expense other than poor investment selections), gifts and more extravagant items within groceries such as cosmetics or alcohol. For some, this could count as a ‘Life’ expense and for some, a ‘fun’ expense. It’s all up to you!
If you’re part of a couple, keep an open mind, and listen intently to your spouse’s thoughts. Allow them to make their own suggestions about where expenditure can be improved. If you both have Money Goals to get your finances in order and move away from chaos, this step will be a lot easier.
This might also be a good time to open a nice bottle of wine, possibly before the conversation begins!