Are you struggling to make ends meet? Let me share with you how simple fixing your monthly budget can be.
First, let me start by sharing the simple math of budgeting. In short, you need to earn more than you spend. Let me break it down:
If Your Monthly Expenses > Your Monthly Income = Budget FAIL (Need to Reduce Expenses or Raise Income – This post is for YOU!)
If Your Monthly Expenses < Your Monthly Income = Your Budget is Working (Focus on Savings / Investing)
Some of you might be saying that sounds too simple, and that’s the good news… budgeting really is simple!
Now, let’s talk about the practical; here are some tips on how to lower expenses and increase income.
Tips to Lower Your Monthly Expenses:
- Know Your Expenses. You can’t lower your expenses if you don’t know what they are. It surprises me when I talk to people who don’t know how much money they need to make their monthly budget work. In some cases, it actually saddens me because it reiterates how our society has failed in teaching the basics of handling money.
- Cut What You Don’t Use or Need, If you look at your bank and credit card statements, you may find those small (or large) monthly drains on your budget. It might be a monthly service plan that you no longer use (such as Netflix or Audible) or a membership for a gym that you swear you will use, but you haven’t used in months.
- Analyze Your Utilities. This is where you can really save money. Ask yourself, “Am I really watching those extra cable channels?” For me, I once found that I was paying for insurance on 2 cell phones that could be replaced for free.
- Review Your Insurance Policies. Recently, I found that we were paying for rental car coverage, however, my wife and I mostly work from home and have two cars. We also realized that we could increase our deductible and reduce the coverage we had (because we drive older cars). That saved us a little over $30 per month. In another case, I found that one of my business leases was charging me insurance when it was already covered by my business insurance policy.
- Don’t Eat Your Future. My wife and I realized that we were spending WAY more than the average family on eating out. Now keep in mind, we don’t yet have kids, so that was our justification. In the end, I realized that we were eating our future. For example, if we saved $200 per month (yes, we ate out that much) and put that into an investment vehicle that earned just 4%, that would accumulate to roughly $74,000. That’s a nice addition to anyone’s retirement portfolio, especially up against giving up a few luxury meals per month. In our defense, we eat pretty healthy and shop organic, so it would make sense that we would spend more than the average family that eats processed foods and fast food.
Tips for Increasing Your Monthly Income:
There are several ways to do this, but one recommendation you won’t see is “starting a business” to make more money because you will likely have some start up and ongoing expenses to start and run a business, so it’s not a short term solution if you need to fix a budget deficit.
- Work Overtime. If you have a job that will allow you to pick up extra shifts or put in extra hours, this can be a great way to quickly increase your income.
- Get a Part Time Job. This is one of the easiest ways to fix your budget deficit. There are lots of companies out there that hire part-time employees and some even provide benefits, which make them ideal for small business owners who need to increase their monthly income.
- Get a Better Paying Job. Perhaps it’s been a while since you have had a raise and you don’t see another one in sight. Maybe it’s time to get a new job; one that pays you more than your current job. There are plenty of great sites out there to look for jobs such as LinkedIn & Indeed. My advice is to never leave your job until you have another one and if an offer or opportunity seems too good to be true, make sure you do your due diligence to make sure it’s the right move.
- Do Freelance Work / Consulting. Unlike starting a business, doing freelance work or consulting is a simple way to get paid for your time (and skills) without having the overhead of a business. Keep in mind you will have to pay taxes on this money, so don’t sell yourself short when you set your prices. In fact, my rule is to charge at least 40% more than what you want to earn. For example, if you want to make $25 per hour, you should charge at least $35 per hour and make sure you put aside the difference to cover – or prepay – your taxes. One last tip; make sure it does not pose a conflict of interest with your employer. It would defeat your purpose if you made money on the side and lost your job.
- Rent Out a Room in Your House. This one can be touchy and I don’t recommend just posting an ad online, but if you have an unused room in your house, you might be able to find someone who is in need of low cost (and hopefully short term) space. It’s best to ask family or friends for recommendations on this one, but another great resource for finding folks to rent a room for you is Airbnb.
- Drive for Uber or Lyft. Depending on your city, this could be a good opportunity. I say this because I know that some cities like Phoenix seem to have an over abundance of drivers, making it harder to make good money. I actually did this myself for a short while and made very good money on the weekends (upwards of $300 for two nights). The key for me, was being willing to drive late and night – and into the early morning- when the rates were higher – and there were lots of people partying who needed rides home. All you need is a car that is in good working condition, and of course a driver license and insurance. There has been some debate over whether or not your insurance would cover you as a driver. I never asked my agent and thankfully I never had an issue.
I hope you found this helpful whether you are looking to increase your income or decrease your expenses.
If there is a tactic that has worked for you in helping to either reduce expenses or increase your monthly income, I’d love to hear from you, so feel free to comment below.