The first thing to do is figure out what that is. You will need to list your income and all your expenses. Using a monthly figure for each will give you the best picture. Some of your expenses are not fixed amounts but do the best you can to estimate what you spent in the past year and divide that by 12 to come up with the most accurate monthly figure possible. Here is a budget worksheet that may be helpful.
Now you will need to subtract your monthly expenses from your monthly income. Do you earn enough to cover your expenses? If the answer is “Yes” – Congratulations!!! You are in good financial shape. You should now use the majority of any excess to start or contribute to a savings account on a regular basis. Treat this amount as you would any other monthly bill and consistently deposit this into a savings account. It is very important to plan for emergency situations. This way you are covered when the inevitable happens. Your car will break down, the washing machine will need to be replaced…you get the picture!!
If the answer to the above question is “No”, you have some decisions to make. One of two things need to happen. One, you will need to earn more money. Or two, you will need to spend less money. All options should be explored. If you don’t do anything to change this picture then you will never get out of debt and you will continue to struggle your whole life.
INCOME
Do you have the option to work more hours at your current job? Have you received a raise in recent years? Is asking for a raise a possibility? Do you have items that are just sitting around collecting dust? Would you consider selling them? Facebook usually has garage sale type pages where you can post items for sale. There are many other online options as well. Or just have an old-fashioned garage sale of your own.
Do you have a hobby or something you are good at? Is it something you could make money with by turning it into a small business? Full disclosure – this website actually has the potential to earn commission fees just by clicking through to the companies or products that are advertised on my website. I learned how to create and fund this website from the internet. There are several website and YouTube videos out there that can teach you how to do the same. At this point it is more fun than income-producing for me, but I can certainly see some potential with a little more effort on my part.
Now you need to take a good hard look at ALL expenses. Are there items on your expense list that can be eliminated? If not, evaluate each one to see if they can be reduced. For example:
CELL PHONE
If you are paying more than $50 per month per phone you should explore other options. There are many plans out there that offer unlimited text, talk and internet for this price. If you are looking for an even more basic plan, I pay approximately $7 per month for the plan I have. Here are a couple of options: https://donnastaxservice.com/cell-phone/ Even if you are locked into a contract with your current cell phone company, find out what it will cost you to cancel. Then do the math to find out if it would be worth it to switch. Even if you have to switch phones you’d be surprised how much this might save you.
Do you need your telephone land line? Or can you get by with just a cell phone plan?
CABLE TV OR SATELLITE
Determine what services and channels you actually use. The companies are quite competitive and you can usually shop around for a better deal. I have seen advertisements for HD TV antennas which look rather interesting. I don’t know of anyone who has tried this but for less than $20 it claims to receive several channels. This would eliminate your monthly TV bill all together. For this price, it looks like an option worth trying.
ENTERTAINMENT
If you are spending more money than you are earning, this should be eliminated until you have gotten this under control. You should never go into debt for something that is not a necessity.
GIFTS
If you are spending more money than you are earning, you really are not in a position to spend money for gifts. This may be the most difficult decision you will have to make. Be creative, offer services in place of cash gifts. Mow someone’s lawn, clean their home, etc. For children, give the gift of your time, go to a play park, go swimming, have a picnic, etc. Your loved ones will understand.
CREDIT CARDS
If you are spending more money than you are earning, credit cards should be used for emergency purposes only. If you have several cards you are trying to pay off, start with the card with the highest interest rate and pay as much over the minimum payment as possible.
SAVINGS
Savings is a must. Once you are able to, you should designate a monthly payment into your budget. Treat this as you would any other monthly expense. This will help you to stay out of debt. Something will break. Something will need to be replaced. Count on it. The goal is to have enough saved so that you won’t need to go into debt again.
Try throwing all your loose change in a large container. Fill it and add this amount to your savings account. You may be surprised at how much has accumulated.
COFFEE
If you are a coffee drinker, you will save many dollars by making your own. Purchase an inexpensive coffee maker, some strainers, and a large container of coffee grounds. You will be amazed at how much money this will save versus picking these up while you’re on the go. The Keurig machine does seem to be quite popular now but the cost per cup seems very high compared to brewing your own.
The savings may seem insignificant but it really is the small things that add up. I’m not sure who came up with the saying “Watch your pennies and your dollars will take care of themselves”, but I am a firm believer!
CIGARETTES
The obvious choice here is to quit, but if that is not an option, consider purchasing cigarettes at Indian Reservations. They are exempt from all the taxes involved so the cost is drastically lower. The price per carton at the Ganienkeh Craft & Smoke Shop in Altona, NY is between $17 – $35 per carton. If you live within 100 miles of one, it probably would be worth the trip to stock up.
GROCERIES
Become a coupon shopper. They are available online, flyers, etc. Spend a little time comparing prices. I do a lot of my shopping online at Walmart. I find their prices are less expensive than most grocery stores. I buy nearly all of my non-perishable items online. Shipping on orders of $35 or more are free. Plus I get a commission on my own orders just by clicking on the “Walmart” ad in the upper right portion of this page. (Please do the same and I will be forever grateful!)
OTHER PURCHASES
Before you make any purchase (even the small ones), ask yourself “Do I really need this?” You will be amazed at how many times the answer is “No”. If the answer is “Yes”, are you purchasing at the lowest price possible? If there a coupon available? A little extra time can sometimes result in savings. Think about what you really enjoy – then find a way to get it for less!