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Step 4Determine your monthly budget

The first and most important question you need to ask yourself before determining your household’s optimal monthly expenses is: are your expenses lower or greater than your income? If your expenses are greater or equal to your total income, you’d need to try and lower them to a level that will allow you to save up the allotted monthly sum that will get you to your goal in 12 months.

You can do that by getting back to the filled-in MONTHLY HOUSEHOLD BUDGET chart that you downloaded in Step 2, and first take a look at the final tally, also known as the REMAINDER.

If you have written down a zero or a negative amount (that can probably be seen on your current account in the form of your overdraft limit), that means that you need to review every single item in the Living expenses chart, especially those expenses that in the previous step you deemed too high and not essential, and to try and lower them to an acceptable-yet-realistic level – one that will increase your REMAINDER and allow you to save up as much as you’ve set out.

Write down those lowered amounts to the second column of the same chart, AFTER REVISION, and then try to be extra careful when spending money on items you’ve revised, or rather – cut back on. For example, if you’re a pensioner who decided that you’re spending too much money on gifts for your grandchildren, instead of buying them a gift or something sweet every time you take your grandchild to the store with you, you might want to do that only on holidays and birthdays, or as a reward for good behavior.

For example, if you save 2,000 dinars every month, in a year those savings will total 24,000 dinars, or 200 euros, which is a sum that provides you with a certain security in case of unforeseen expenses. Two thousand dinars is around 15 packs of cigarettes, ten quality chocolates, one night drinking out with your friends, five blow-drys at the hair salon or a couple of cab rides.

Why is it so important to set aside something for a rainy day? That is your protection from unplanned events, such as loosing your job, your pension being late, losing your cellphone, household appliance or car breakdowns, illness and injury (God forbid), or getting an enormous electricity bill because the winter was so cold you had to turn on additional heating. Also try not to spend any unplanned income all at once on something you wanted for a long time, but rather set it aside and thus start your savings that you’ll increase bit by bit each month.