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Here's how to effectively trade-off expenses in your budget

by , 08 October 2014
Creating a budget is all about drawing up a system of financial controls. These help you monitor your spending so you never make a loss.

The problem comes in when additional urgent expenses pop up in the middle of the month. This can cause all kinds of issues with your budget if you just add the expenses to the existing list.

It could throw off your budget and you might need to start from scratch.

Why let that happen when you can do an expense trade-off instead.

Here's how to do this effectively so your budget still balances at the end...


Effectively trade-off your expenses so your budget still balances

An expense trade-off is when you swap out one expense for another. The key with a trade-off is to find an expense of the same or similar amount as the new one.
This way when you swap them, your budget will still balance. It's okay to have a slight difference as the chances of the new expense exactly matching an existing one are slim. Just ensure you adjust your budget to account for that slight difference.
So how do you choose which expense to swap out?
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Use these two criteria to evaluate your expenses before you do a trade-off

Criteria 1: Urgency
If an expense is urgent, you can't swap it out of your budget. Doing that would simply leave you in the same situation. Rather swap out an optional expense that can wait another month such as the cost of servicing your company cars.
Criteria 2: Repetition
If an expense repeats each month, like a telephone bill, swapping it out of your budget this month means you'll have to pay double next month. This leaves you with a different financial problem. Rather choose a once-off expense you don't have to account for each month. 
Swapping out a once-off, unimportant expense with a similar value to the new expense will help you do an effective expense trade-off so your budget still balances. 
For more budget help, check out the Master Budget Series. It has budget templates to help you create effective budgets every time. 

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