This week has been a week full of income and money related posts. Why? Because I want you to be financially successful. I want you to have the financial freedom every one of us dreams about. Now I might now be shelling out million for a yacht (soon to come), however we live a good life and the fear most people have from not living a good life is what happens when I blow my budget. In other words, I am not making enough money to maintain my current lifestyle. The answer is fairly simple, no?
But let’s go a bit deeper than that. I have gone through the same thing and imaging or actually having it happen to you, the fact that you are not bringing in enough income to pay bills or unexpected expenses so a really crappy scenario. I don’t want anyone to have to deal with this, yet unfortunately a majority of the world has too. That’s where we begin to scramble money together from borrowing or using credit cards to make ends meet in that specific month. It sucks. I’ve been there and done that.
What I want to dispense in this post is more around the mindset of what you’ll need to do and the first thing you need to keep in mind is – do not be too hard on yourself! It does not help you or anyone around you. Sometimes we all fall short of our expectations and what we would like to see happen in our lives and this relates to income and money as well. So take a breathe, have a walk and remind yourself of the positive things in life. One thing I tell myself when I’m having “one of those days” is that somebody out there would love to have my “bad day.” So don’t panic just focus mentally on what your next steps are.
Lets figure this out:
1. It’s all about income AND expenses
If you do not make enough cash to fund your budget, for whatever the reason may be. Perhaps you got a salary cut or you had increased unexpected expenses that were not accounted for and now your screwed, well you need to sit down and be able to look at both your income and your expenses. Its really simple. Draw it out on a sheet a paper. Make a T bar and and note down debits and credits. Either way regardless of what your financial situation may be at any given time you always have two choices – make more or spend less.
Now when we look at those two things you need to figure something out. Is there an issue with your income or do you have a problem with spending? This is key because if you are spending only on essential basics and still do not have enough money to get by you either need a higher paying job, need to work more hours or fund the issue with side income. However on the flip side of that, if you are spending on the most expensive cell phone plan, have cable TV and regularly take vacations, than you may have a spending issue and need to work on cutting some expenses until you balance your budget or earn more income to cover those additional luxuries.
The most important thing to take out here, is to take a step back and honestly evaluate and analyze your situation. When the realization hits that you cant cover all your costs in a given month or this happens repeatedly then you will need to make tough decisions. However make sure the decisions you make are sustainable for you and if you have others than for your family as well.
2. Increase income
In an earlier post this week, we’ve covered this one a bit however lets think it out a bit as it relates well to this topic. If you are only earning enough to get by (minimum wage) than things just wont work out. This should definitely not be your life-long pursuit. If your in your teens or just fresh out of high school or simply need a temporary job in-between things, than totally fine. Go for it. Better to earn a euro than sit around and do nothing for 3 months. However, you need to aim higher than that in the long run and to me that means make more money. It’s common sense and so simple. The issue is that if you are already in the situation of “not getting by,” you being focusing on the lack of things, not having, not being able to rather than the potential and practical solution of generating more cash flow. It may be tough. It may mean a temporary second job, etc. But don’t overlook that option even when things are tough. Figure out mentally how you can overcome the situation.
3. Reduce expenses
Logical! Logical! Logical! I love optimizing everything and that goes for my bills as well. I always look at how I can reduce costs and still get the same or better service and I do that with those close to me too. I’m always reminding my parents and family members to renew contracts where needed, get better offers and/or make changes. But if your struggling already or something similar may be in sight than begin lowering your budget. Cut back on what you can get rid of and what you do not need. Cancel the gym membership for a few months, no more eating out, and what not until you get back on your feet. Really look at what are “needs” and what are “wants.”
Like with many things in life start prioritizing and only spend on those things that are essential and you value the most. You need to start cutting costs on non-value things that are in line with your principles and values. Because forcing something will not change spending habits. Believe me.
I also want you to keep in mind to stick to that budget. Continue lowering it where possible and whenever possible because just like I mention in the previous point, you can still go out and earn more. You can still hustle and bring in extra money, however what tends to happen is if we have a few extra euros laying around we being spending it again because the more we make the more we find things to spend on that (honestly) we don’t even need. So stick to your budget and utilize the extra money if possible.
Now if you struggle on what expenses you can cut then sit down and have an honest discussion with yourself. Here are a few of my suggestions:
Groceries – my parents always told me, no matter what happens in life, you never cut spending on food. However I don’t fully agree. I get what they mean/meant however look at this way: you eat consistently and that is fine. Go ahead. The question you need to ask yourself is: “What am I eating?” If your having trouble with your budget and your out grocery shopping with cookies and ice cream in your cart, than that is not cutting expenses. Those are not essentials and you can live without the. If you are on a tight budget you go for fruits, veggies, lean meats, etc. Finding additional euros to fund other areas of life can easily be done be looking at your shopping basket. Forget the impulse buys – leave the chips alone!
Impulse purchases – this is a lot of those “wants” more so than “needs.” You want to fund a lifestyle you think worth living, but if your struggling you cant go out and simple buy a new pair of nikes or the latest iPhone. Get honest with yourself and keep yourself accountable, that until your back on track, whatever is not on your essentials list does not come home with you.
That being said, I truly hope you never fall into this situation. If your there stay positive. Tomorrows post will include some food for thinking on how you can reach your goals to balance yourself financially.