Penny suspects she is spending more than she earns by about $500 per month as her credit account is slipping more and more into debt each month. That’s $6,000 per year on a credit card charging 14.5% interest. Here is an overview of her spending.
If Penny simply reduced her choice expenses by 20% she would begin to spend within her means. If she then reduced her discretionary spend by 10% she could start saving money and invest in her future.
| Summary of Penny’s current income and expenses | |
|---|---|
| Income | $72,495.00 |
| Expenses | $78,723.32 |
| Net cash flow surplus/deficit | ($6,228.32) |
| Committed costs | |
|---|---|
| Mortgage | $0.00 |
| Rent and body corporate fees | $12,458.60 |
| Rates and levies | $0.00 |
| Utilities | $4,800.00 |
| Car, motorbike green slip | $1,200.00 |
| Licence and motor vehicle association membership | $320.00 |
| Car registration and servicing | $4,560.00 |
| TOTAL | $23,338.60 |
| Discretionary Costs | |
|---|---|
| Credit card repayments (interest only) | $1,656.00 |
| Lease repayments, equipment rental | $3,000.00 |
| Other financial expenses | $1,800.00 |
| Home maintenance and decorating | $8640.00 |
| Phone, mobile and internet | $4,644.00 |
| Groceries, meat and veg, lunches, etc | $7,351.56 |
| Other living expenses | $668.40 |
| Medical bills | $980.00 |
| Car maintenance and repairs | $600.00 |
| Petrol | $713.00 |
| Income protection insurance (deductible) | $675.00 |
| Private health cover, Medicare levy | $2,553.60 |
| Home and contents insurance | $400.00 |
| Bank fees | $120.00 |
| Accountant and broker fees | $600.00 |
| TOTAL | $26,605.56 |
| Choice costs | |
|---|---|
| Clothes and shoes | $4,680.00 |
| Household purchases | $1,260.00 |
| Gifts | $1,800.00 |
| Hair care & products | $960.00 |
| Beauty products & treatments | $2,700.00 |
| Fares | $648.00 |
| Parking fees | $1,278.00 |
| Other car/transport costs | $320.00 |
| Parking fees | $1,278.00 |
| Holidays, weekends away | $5,000.00 |
| Restaurants, takeaway, snacks | $7,240.44 |
| Alcohol, cigarettes etc | $2,172.72 |
| Other leisure | $720.00 |
| TOTAL | $28,779.16 |
If Penny simply reduced her choice expenses by 20% she would begin to spend within her means. If she then reduced her discretionary spend by 10% she could start saving money and invest in her future.
