Setting the Foundation
If you’re reading this article, you either are ready to tackle your financial goals, or you just had “the Talk” with your partner and you are both now on the same page towards defining your united goals. Congratulations! Now comes the real work, as you will have to start making changes in order to achieve those goals that you have planned out. This article is going to be focused on the individuals who have started to look at their finances and discovered that…MORE MONEY IS BEING SPENT THAN COMING IN.
This is a huge problem; the biggest. I’m here to help you out. First, breathe and remember that knowledge is power. You’re already well on the way to fixing this problem just by doing this research and finding this blog. Now, there are several steps you can take to reverse this flow of money.
“You’re already well on the way to fixing this problem just by doing this research and finding this blog.”
First, you have to pay your rent/mortgage. If you can’t do that this month, be proactive and call your landlord or lender and talk to them. Most companies have some sort of hardship program that will allow for a payment plan or late payments. Once that’s covered, next is food. Make sure to keep in mind what fruits and vegetables are in season, as these will generally be cheaper and healthier. In addition, don’t eat out this week. Pack your lunch if you’re able (I’m a big fan of meal prepping ). I also want to say that you should never be afraid to look into foodbanks in your area and what their requirements are to utilize them; if you need the extra help, they’re resources made to help you get back on your feet.
Once you have your food situation covered and stable, the next focus should be to pay your utility bills. By doing this, you ensure that your power stays on and you can take a warm shower at the end of your day. These payments should be relatively stable and therefore not too hard to budget for per month. If you’re unsure of what your monthly payments look like, either check your last few payments or call your provider to ask for an average monthly bill. Keeping this in mind, there are ways to lower your monthly utility bills (at least to some extent) by being mindful about your utility usage. Turn off the lights when you leave a room, and switch the TV off when you’re not engaged in watching. Try to cut down your shower time, turn off the faucet while brushing your teeth, and wait for your hamper to be full before running a load of laundry. These may sound like small things, but they can add up the more you cut back. In addition, depending on where you live, you may be able to chose who provides your electricity/gas, and actually negotiate a cheaper rate per month. Once you are confident that you can pay all of your utility bills per month, the next consideration to add is your income-related expenses.
By income-related expenses, I mean the things you HAVE to pay for in order to successfully complete your job and gain income. This could be budgeting for transportation to your workplace such as gas for your car, your monthly bus or train pass, or maintenance for your vehicle or bicycle. Maybe you pay for your own phone service to conduct your work, so that would be a priority (not to be confused with you own personal phone use if that is separate from your work). If you are required to make any other similar purchases in order to keep earning income, those should be included in this category. After these are met, you should prioritize your health care. A good way to keep medical expenses down is to have regular check-ups to avoid big expenses later and have coverage that will help pay any unexpected bills should they arise. Having health care should also help lower any monthly prescription expenses you may have through their coverage.
Now that you are assured of your place to stay, that you have food for the time being, and know you can continue bringing in money, look at what debts you have. This can include credit card debts, car loans, student loans, etc. Set aside money per month to make sure you can cover the minimum payments. This is important because you will avoid late fees, overdraft fees, and other penalties you could accumulate that can add up quickly and really hurt your finances.
After you are confident that you have planned your income around paying all of the expenses mentioned in this article, it’s time to look at what you have left over. If nothing is left, you have two options. The first option is to continue to cut spending, such as buying more calorically dense and cheaper foods (beans, rice, etc.). Cutting costs can help you two-fold; it gives you more money now to help pay off your debts, and thus lets you save up more money to save/invest/use later. The second option is to make more money. If your expenses are already optimized as well as you can, the only way to sway the equation is to increase how much income you’re bringing home. To do this, there are a few different things you can do. First, work towards a promotion at your current job. If that’s not a viable option, try looking for a better paying job (but don’t quit your current job until you have your next one lined up and secured!), or maybe consider picking up a second job or a “side hustle” to generate some extra cash. This will be covered in more detail in an upcoming article.
Now that you’ve successfully balanced your finances to cover your foundational requirements, it’s time to move on to the next step! This will include looking into saving up a small emergency fund, and also looking into your company benefits to make sure you are gaining as much from your benefits as possible.