COMMENT
Take The Extreme Budgeting Challenge!

Just before Christmas, I wrote this article as a tribute to one of my Foolish colleagues. Thanks to his prudent lifestyle, my workmate lives well below his means, steers clear of debt and is able to invest a substantial slice of his income for long-term rewards.

Although I shun loans and other interest-bearing debts, and invest part of my income every month, I still fritter away far too much money on trivial and needless items. If I led a more Foolish lifestyle, I would have far more money to put aside for my family's future.

As it happens, there are several reasons why now is a great time to set my finances on the right track for 2005 and beyond. One reason is that it's close to the start of the year, which is usually a time for optimism and bold resolutions. However, the main reason is that my household expenses have rocketed since I moved house last year, so I'm obliged to cut back!

In an article last October, I described how my wife and I planned to chop around £800 a month from our expenses by cutting back on unnecessary luxuries, frills and trimmings. Now that we're putting this into practice, it's proving hard work!

For example, I haven't run up any "leisure and entertainment" expenses – including alcohol and tobacco - since 30 December. (As someone who likes to be slightly unconventional, I began my New Year's resolutions a day early.) I have to say that going cold turkey - temporarily abandoning my social life for wholesome living - has been predictably painful. Nevertheless, I've been "clean" for twelve days, which has probably saved me about a tenner a day.

Another innovation is that I've stopped buying breakfast and lunch on workdays and, instead, I've been bringing a packed lunch to work, as several of my colleagues do. This saves me about £5 a day, which comes to £30 so far - and the year has only just begun. We've also stopped buying takeaways, which we used to have at least once a week. Though this saves upwards of £20 a week, I miss my curries!

Other things we've done include doing more shopping at Tesco instead of other more expensive stores, such as Waitrose; switched to wireless mega-fast broadband (2Mbps for £15 a month!) so that we only need one phone line; stopped buying weekday newspapers; and cancelled our daily doorstep delivery of milk.

Anyway, I've decided to take things to the limit by slashing my everyday personal expenditure to close to zero - and I've come up with two ways to help. The first is "Spend Nothing Days", where I attempt to get through an entire day without spending any cash whatsoever. Since the start of 2005, I've only failed last Wednesday, when I was forced to buy milk on my debit card because I only had 2p on me! The second trick is "No Cash Withdrawal Days", when I ban myself from withdrawing cash from my bank account (I'm at ten days and counting).

Normally, my bank statement is about three pages long and is littered with ATM and Switch transactions. In fact, I take out an average of around £600 a month in cash alone. Yikes! My latest goal is to reduce my bank statement to a single page, largely made up of Direct Debits and standing orders for my essential bills, plus a few one-off withdrawals to keep life ticking over.

I'll let you know how I'm getting on with my attempt at extreme budgeting in a future article. In the meantime, I'll award one of our excellent Fool books to the person who can demonstrate the biggest percentage drop in their household expenses from extreme "living below your means". Just click on the "Have your say" link below and leave a message for me on our Article Feedback board.

More: Visit our Living Below Your Means discussion board | 25 Quick Money-Saving Tips.