If you are not familiar with the term discretionary expenses, it refers to non-necessary spending, or spending money at your discretion rather than on necessary expenses.
While rent, mortgage payments, and groceries are necessary, discretionary expenses are those you incur voluntarily such as dining out or cable television. Your discretionary spending budget is only as big as the income you have available to fund it. This budget worksheet can help you examine the details of how much money you have available to spend at your discretion.
How to Use This Worksheet
To figure out how much discretionary money you have, it helps to use a worksheet to list all of your expenses and income. You can use this worksheet to get an idea of how much you spend or expand it to include other items to create a complete budget worksheet.
Cutting Down Discretionary Spending
This worksheet consists of bills that are easy to cut out if you had to reduce your spending. That can be a matter of personal opinion, as some people find it hard to imagine that some of these items, like cable television and home internet, are discretionary. But if you think about it, they're not essential to your survival, no matter how much you might love your TV shows, Facebook, or online games.
Most budget overspending occurs within the discretionary category. You may not have thought about how much your gym membership costs, how much you were spending dining out or on morning coffee. However, if you're trying to save for a house and are trying to figure out why you have no money left at the end of every month, it pays to scrutinize your discretionary expenses.
Examples of Discretionary Expenses
Here's a list of some common discretionary line items. Start by entering what you think you're spending on them in the middle column, then go through your last few months of bank and credit card statements and enter how much you actually spend on them each month. If you typically use cash, you may have to dedicate a month or two of tracking your expenses first.
|DISCRETIONARY EXPENSE||MONTHLY ESTIMATE||ACTUAL|
|Cable or Satellite TV|
|Dining Out - Restaurants|
|Fast Food/Casual Eateries|
|Gym / Fitness Club|
|Subscriptions (magazine, Netflix, etc.)|
|Professional / Club dues|
|Hobbies and Sports|
|Lessons (Music, Art, etc.)|
|Holidays and Gifts|
Even if this discretionary spending worksheet is the only budget you're using, you will probably develop an idea of where money is going once you complete it. Use this list to generate ideas for where you can make cuts in your budget if necessary.
Use this along with the worksheet for income and necessary expenses so you can create a complete budget.
The Next Step for a Complete Budget
If you've used the income and necessary expenses worksheet, you can now add your fixed and discretionary totals.
|Total Expenses (Necessary + Discretionary)|
If you spend more than you earn, you should look into reducing your spending. Resist the urge to go into debt or deepen your debt to remedy an overspending situation.
The Final and Hardest Budgeting Step
The hardest step in creating a budget is not deciphering where your money is going, nor is it establishing spending limits. The toughest part is following the budget you have created. Many people create budgets and have an intention to follow them; however, the discipline to follow a budget is where most people have difficulty.
Use your spouse or partner to help you stay within your budget by developing goals with them. They need to have the same financial goals as you do, or the chances of you both following a budget will be significantly reduced.
Let your friends know about your budget, and ask them to help you stay within it as well. With a plan, and support from friends and loved ones, it becomes easier to follow a budget and have some discretionary spending money.