When running a business, you are to profit and manage your expenditure judiciously. One great way to manage your expenditure is to cut off on unnecessary expenses. The moment overhead cost becomes a visible burden upon your business, the business begins to run into problems, probably incur debts and eventually folds up.

Here is something I do personally when it comes to my expenses which I feel can be applied to business and personal affairs.

1. Itemize your needs.
2. Make a budget.
3. Plot your scale of preference.
4. What is important?
5. Make the right choices.

 

Itemize Your Needs

Itemizing your business need is that simple. It requires you to list out the required things that need to be put in place in order for your business to run successfully. These things can be endless and may include people, tools and resources.

We would be looking at a personal case study of mine when I decided to get a new mobile phone recently. I made a decision to get a new device putting the following in mind; design, speed, camera, battery strength and features.

Having listed all needs, I took an inventory of available devices on the market that met my needs.

Make A Budget

Having a budget is always a good approach to managing your finances because it helps you track your spending and also estimates how much you should be spending at a point in time.

So back to our case study, I made a budget that I was sure I could afford then I tailored my search for a mobile device according to my budget.

You could do the same in your business too. Do you need to install some tool within your work environment to make things better and not drill a hole in your pocket? Why don’t you consider making a budget and see which of your needs fit into this budget.

Plot Your Scale Of Preference

Yes, a scale of preference. Now you are about to realize that those of Economics back in high school was not a waste and can be applied to your reality. This vital concept of Economics is simply defined as the list of wants or needs that a person writes or comes up with in order of importance.

At the end of the day after a scale of preference is made, the individual arranges his needs hierarchically in a list according to their other of importance and selects the most pressing need while he forgoes the other needs of lesser importance which are regarded as opportunity cost.

This same strategy can be applied in your business after you have made your budget. As for me, I had to settle for a device within my budget and still gave me what I wanted.

What Is Important?

Here is what is important, spend only on the necessities and not on what is available. Sometimes tend to spend on things we do not need and at the end of the day, these things we buy lay fallow and do not get to harness the full potentials of what we paid for.

In some cases, we do not buy some items just because we really need them but we just want them for social gratification. Well, I am not saying buying things for social gratification is bad. Yes, you can do that if and if only you can afford to and not put a hole in your pocket.

In some other cases, it is the sellers of these items that talk us into buying more than what we need. We cannot totally blame a seller for this because at the end of the day, he just wants to make sales though I consider that as being selfish on the part of the seller. It is the seller’s duty to educate his customers on the features of his products so they can be properly enlightened to make the right decisions.

People who do not know what they want are usually swayed by the sweet mouths of the seller just because the seller wants to make sales.

 

Now that we know better let us do well to approach our expenses the right way by picking a cue or two from this article.