Income vs Expenses: what to do when your finance is in a fix.

 

Everything is way more expensive now! Your children’s school fees seem to go up every year,barely have enough to entertain yourself like you used to and God help you if you have an emergency situation that requires cash to solve it because you don’t know who else you are going to get the money from.

If this describes your condition, well, I won’t say don’t fret, but I would say, you are not alone.

What your condition requires is quick evaluation and action because you can’t go on like this for much longer; you will derail your long term financial goals otherwise. In this post, I share a plan that will hopefully get you out of your rot and back on the road to financial freedom. You may already be familiar with some of what I will share but sometimes we all need a refresher.

You need to write down and track all your income lines and your expense lines for the month. If you are not doing this monthly, then frankly, you haven’t even begun to solve your money problems.

Evaluate Your Situation.

When your spending constantly outstrips your income, you really have just two options: increase your income or reduce your spending. That answers the “how to?” question but the more important question to ask is the “why?”. Why are you always in this situation? Let’s keep the more obvious answers till later and tackle the root cause. Your “why” could be because of a new addition to your family or that you’re taking a distance learning course that requires you to travel more frequently. Sometimes, it’s a recent change and can be identified easily, other times, it requires some probing.

Pen down your plans.

This is important! You need to write down on a sheet of paper or on a spreadsheet or better still in budgeting software, all your income lines and your expense lines for the month. If you are not doing this monthly, then frankly, you haven’t even begun to solve your problems.

When you create a monthly budget before the month starts, you need to ensure that the expenses are lower than your income and then you save the difference.

Be disciplined!

Try to remember that you are in a temporary situation and you can plan your way out of your circumstances.  In summary, you will need the following:

·     Short term plan: Reduce spending and cut out all non-essentials.

·     Medium term: Look for side hustles that fetch you some money to shore up the income gaps.

·     Long term: find a way to grow your overall monthly income. This might mean getting a new qualification or switching jobs or even careers.