Many at times, employees  with fixed income at regular intervals might think they have gotten their  financial situation pretty well under control, Budget drawn and figures slotted in with a  determination to stick to the budget. Then suddenly those Pesky little bills shows up. They  are nothing too big,  a few thousands here and there but when you add them up  you got some significant expenses, These pesky bills are “must  pay”  bills like water , phone, and electricity bills. They just crop up especially when you have done the budget for the bigger bills but somewhat forgot to slot them in.

When it comes to figuring out where you need to cut expenses, you will find spending ratio to be a useful tool. A spending ratio is simply  the percentage of money as it relates to your gross income  that you use for a particular area such such as entertainment or shopping. Spending Ratios are useful in determining the amount of gross income that goes towards a particular expenditure area that can be reduced paving way to pay  for those pesky little bills that must be paid.

Spending ratios paves way to figure out  your debt ratio whilst creating more space for savings and other little bills that might crop up. To figure out your total debt ratio, add up your monthly payment including car bills, rent , phone bills and  compare that number to your total income.

If it is more than 36%  of your total income those expenses are too high and ways of cutting them down should be devised.

Also figure out you saving ratio which is a percentage of gross income compared to the amount of money you save each week or month for that period.

Talk about being picky, expenses should also be broken down to into fixed expenses such as rent and car payment and variable expenses such as food and entertainment. These category can also be further broken down into discretionary expenses and non-discretionary expenses which helps to put these pesky little bills in the right perspective that wont come as a shock  when the budget has been drawn .

After spending ratios have been figured out, a very clear  picture will be seen on spending and for any pesky bills that might turn up. You would be  able to make regular payments on any outstanding debts, save a portion of income and also have some money for discretionary purposes. Being financial health goes  a long way in determining your wealth in life. However, if you are spending everything you earn without saving anything you have to change your ways.

There  are two ways to handle this situation, you can either spend less or earn more. Most employees who fall into the hard core spender category would usually think  earning more would be the solution however  statistics have shown that that such people may very well need to do both- Earn more and spend less.