When it comes to matters personal finance, improving your status quo is a must. You can do this by either cutting down on expenses or earning an extra income. Psychologists have also weighed in on this issue by stating that people are strongly inclined to either saving or spending.
Here’s where the big question arises; which option should you settle for? Without a doubt, you stand a zero chance of saving money if you’re not earning anything in the first place. This narrative is sure to evolve with a steady income in the mix.
Most individuals, however, focus all their resources on either saving most of their income for early retirement. There are also those that spend the rest of their days living a frugal lifestyle. For most, the ultra-minimalistic lifestyle has its fair share of perks.
To a few others, this is not their cup of tea. Others still prefer to rake in extra bucks by going up the corporate ladder or establishing a million-dollar empire. They end up leading a ‘happily-ever-after’ kind of lifestyle after taking this path.
The question still remains: Which path to financial stability should you opt for? Should you become a faithful coupon evangelist who scans the dailies to collect these precious coupons and heavily save on groceries?
Or should you work your way to a career full of enviable perks that are way beyond the reach of most individuals? This article explores each of these options in an in-depth manner and finally, you’ll be the judge on the best option that may work out for you.
This is the process of putting strategies in place to reduce your overall expenses. Over time, there will be an increase in your level of profitability.
Cutting expenses enables you to be conscious of your spending habits and to work your way through overspending. Of course, this isn’t always easy in this fast-paced world where living a high-end life is the way to go.
With that said, we tend to underestimate our regular bills as either small or insignificant. These ‘unimportant’ bills tend to have a significant and cumulative effect on our resources in the long run.
What if the Expenditure Outweighs the Revenue?
Sometimes, you may have unexpected expenses that you need to cover from your limited income. Sure It happens to the best of us.
If you’ve reached to a point where running out of cash by the end of the month has become more like a norm, it’s a clear indication that your budget is most likely in the red.
In cases such as these, most people prefer to increase their revenue by finding a better paying job or a side gig. If there are no employment opportunities in your area, it will be best to adopt aspects of minimalism to help you save money. You could also consider learning more about working online.
Setting Up Priorities
Every individual has their own unique spending habits. If you are a family person, have a clear understanding of what your family’s monthly costs are. This way, you’ll find no problem setting up priorities in your spending.
How do you do this in a way that will be of use to you as an individual and for your whole family?
- Don’t throw your family in the back seat – It is highly recommended that all family members bear the burden of reducing costs. This is especially when making savings and household budgets. Try not to let your partner or family member feel injured.Let them not feel like that they must be deprived of the things they genuinely care about in the process. Instead, sit down and have a clear plan of how you can cut down on costs effectively.
- Regulate Variable Costs and Have Fixed Costs at All Times – Of course, not all domestic costs vary from time to time. For fixed expenses such as mortgages, rent, and transport, you can easily set aside the amount of money required. The rest are costs that are variable (ranging from a single month) and can be adjusted to reduce the unwanted pressure on household budgets. Examples of variable costs could include: too many toys for your children, meeting up with friends for a drink or two after work, or over-shopping on clothes you don’t really need. By spending less on variable costs, you’ll be able to achieve more monthly savings. Based on your day-to-day needs, it is highly advisable that you prioritize and point out the specific area where you could save.
- Don’t tempt yourself – When shopping, credit cards are synonymous to convenience. Rather than stuff your pockets with bundles of cash, you have the option of putting them all in a single card. However, a credit card could also be a recipe for disaster if not properly managed. Often, even the best of us have an irresistible impulse to swipe the card at any store within our vicinity.
Many people are ignorant of the fact that each time we pay using a credit card, a certain amount of interest is deducted from our accounts. Therefore, the more you swipe, the more money you lose. There’s no harm in using it once in a while.
It becomes a major crisis once you notice you can’t go anywhere without your credit card.
With these three priorities in place, let’s direct our focus to strategies that can help you save. Both for the long and short haul.
Though it may take a while before eventually figuring out how to cut costs on expenditures such as phone and internet bills, insurance premiums and transportation, the outcome of it all will be well worth it.
If you’re overwhelmed by your monthly expenditures, all you need right now is a lifestyle that will help you adjust your daily spending.
Here are some of the best ways of lowering your monthly expenditure:
Be Mindful of Your Eating Habits
If you find yourself in a heated debate on whether or not to eat at home or stop by your favorite restaurant, you’re better off not leaving the house at all.
Statistics show that in 2016, the cost of home meals dropped by 0.5%, while the price of eating at hotels and restaurants increased by 2.7%. According to a 2017 report by the U.S Department of Agriculture, these trends are set to go a notch higher.
Here’s what this means: a simple meal of vegetables with rotisserie chicken costs you $12.95 at a restaurant, while at home it will only cost you $6.50.
Also, on your next stop to the grocery store, remember to go prepared. Studies reveal that approximately 70% of purchases turn out to be impulse buys. Make the right choice. Draft a list beforehand and stick to it.
Another great way to eat healthily while saving is by making use of coupons. You can save up to $30 to $50 a week by using coupons for household items, tobacco, clothing, and foodstuff. Before making your way to the grocery store, always munch on something to keep the hunger pangs away. Otherwise, you may end up spending more than what you budgeted for.
Lower Interest Fees by Consolidating your Debt
Statistics show that on average, a U.S household with a credit card has a balance of $16,425 with an average interest rate of 16.49%.
It’s alarming that people are wasting away millions of dollars every month on interest charges, while they overpay with a credit card for non-essential items. Get on the right path by finding out what it takes to get a decreased interest rate from your credit card company.
If at one point you feel that the monthly bills are taking a toll on your state of mind, try enrolling in a debt management program. Your interest charges will be consolidated by counselors who will work hand-in-hand with lenders. You’ll gain control over your finances, eventually.
Go Easy on the Power
It’s a given that electricity eats up a massive chunk of almost every household’s earnings. And yes, we can’t do without it. What matters is the amount of power you’ll decide to consume.
These few suggestions can save you cash, and you’ll have nothing to worry about once the bills show up at your door.
Rather than using energy-consuming light bulbs, make use of energy-efficient ones instead.
Electronics such as kitchen appliances, workout equipment, and stereos that are frequently used have a tendency to have levels of power consumption albeit slowly.
Until there’s a need for these equipment, always keep them unplugged. Also, avoid keeping your air conditioner on even when it’s not needed. Air conditioners are the biggest power consumers. Alternatively, use fans for cost-effective air-circulation.
Have a Clear Outline of Your Purchases
Many people feel like having a clear outline of what you want to buy is unnecessary. A proper ‘to buy list’ should be given utmost priority if you are to significantly cut down your household spendings.
Before making your trip to the store, make a shopping list and stick to it. This becomes most especially useful to people who buy out of excitement (impulse buyers). They tend to go for more than what they had in mind.
A shopping guide will ask questions like, “Is it really necessary to stop by a coffee shop on your way to work? How critical are the snacks or three sodas a day you purchase for $1.50 each from the office vending machine?” From your shopping guide, you’ll see what is most important to buy and what’s not.
From the outline, it will be interesting to know that a cup of homemade coffee is only 25-35 cents, almost the same price for a can of soda.
A shopping list is a MUST if you need a clear idea of what you really need. It will also help you to drop the habit of buying unnecessarily.
Take Advantage of Solar Energy
We all know the important role that sunlight plays in our ecosystem. What most people don’t know, however, is that it’s also an excellent alternative to electric power. During summer, your home heats up as a result of the sun’s rays coming into contact with the roof, windows, and walls. You can drastically cut your energy bills by turning the hot sun into electricity.
The federal government Home website states that “40% of the heating in your home can be lost and approximately 87% of it can be gained through windows”. If you’re planning to go with solar energy, consider glazing your windows. You’ll get a great deal of noise and thermal protection this way.
What Does it Take to Keep a Budget?
According to economists, keeping a budget a budget isn’t rocket science at all. They believe that the best way to lead a financially secure lifestyle is to earn more money than you actually spend. The assertion is correct in every way, although it sounds almost too easy to do.
This affirmation also directs us back to the topic of discussion of whether to increase income or reduce expenses.
A relatively simple calculation that may help you determine whether or not your budget is leveled correctly is to add up and evaluate the total monthly expenditures with the total monthly income. If you are still left with little extra money at the end of this evaluation, it’s safe to consider yourself a splendid manager of your budget.
Pillow banking is not an option when it comes to saving that extra cash. Deposit it to your bank account, and you’ll be safe this way.
Consider setting up a private pension or insurance. This can play a huge role in solving important family issues or your own individual needs.
In a nutshell, discipline and an understanding of how important it is to have a clear balance of your budget will greatly help you in the long haul.
Earning An Extra Income
After cutting down on costs, earning extra income is one of the most preferred ways of leading a financially stable life. Unfortunately, though, not many people have side hustles and worse still, see the need of having one.
They consider it an uphill task and something next to impossible. This is not the case. On the contrary, learning how to earn an extra income is one of the best things you can ever do for yourself.
If you’re confused about how to go about, don’t fret. There are so many ways to get help. You could learn a lot from individuals who work two jobs at once or you could choose to go the online way and learn a thing or two about making money online.
Check out online sites like Survey junkie, Ibotta, Trim and Shopkick. Not only will it give you a deeper understanding of what it means to manage your finances, but you’ll also learn new ways of earning extra cash. It’s a welcome idea since we could all do with some extra bucks.
Here are more reasons why you should consider earning an extra income.
It Sharpens Your Entrepreneurial Skills
If starting your own business has always been lingering in your mind since you were a kid, grab the chance and go for it whenever you get the chance.
This is definitely a great idea, especially if you have a full-time job. You’ll have the chance of testing the waters of your new business hustle free. You still maintain the income and stability from your full-time day job. Over time, if your side hustle picks up and is steady, you’ll be able to work your way towards building your wealth.
Whether it will work out and eventually start earning from it depends on whether you can move out of your comfort zone and take the risk. Sure, it may not be easy but what you’ll get in return will be all worth it.
In short, as you work hard to earn a living, working a second job will be a smart move Obviously, it’s all about sacrifice and a whole load of hard work.
You Will Be Able to Pay off Debt Faster
The no. 1 reason that most people work a second job is to tackle financial crises that the first job can’t. Earning extra income may not pay off your debts as fast as you would want it to, but it still gives you the assurance that you’ll have something extra to take care of pending payments.
Once you start building up additional income streams, you will be able to pay off your debt quicker.
As mentioned earlier, working a second job will require a ton of hard work as well as dedication. However, keep in mind that you won’t have to work for such long hours for the rest of your life. That inch of pain you feel right now is the price to pay for a debt-free life later on.
An extra $50 a month from the business is more than the $50 you initially had. It may look like a small amount, but it will go a long way in reaching financial freedom sooner than you think.
It Enables You to Live Within Your Means
If you wish to build real wealth, you must be able to live life within your means. If you’re holding back the need to buy something that you really desire but can’t because of your tight financial status, a new source of income would be a welcomed idea.
This primarily works for people who find cutting costs impossible to do. While there are those of us who can minimize their spending habits, there are also those who can’t. They are willing to work extra hours to take care of their non-frugal lifestyle.
Saving for Retirement Will Be a Breeze
A lot of young people out there, unfortunately, just live for the moment. Shop, party like there’s no tomorrow and live life on the fast lane. Don’t get me wrong, there’s nothing wrong with that. Enjoy every moment of your life. But keep in mind that there are college debts and other things that need utmost attention aside from blowing money unnecessarily. Prioritize.
It’s a given that if you’re young today, age is bound to catch up with you down the line working years will be long gone. Taking care of their individual needs will be next to impossible. It takes commitment to be on the right path toward financial freedom. Again, it’s never too late to start, but it’s better if you could begin while in your hay days. Here’s where an extra income comes into play.
Working two jobs will help you take care of your current financial needs, while at the same creating a retirement savings plan that you can fund at any time of the month. While doing this, be in close contact with a financial advisor who can assist you come up with a good plan to cover you through retirement.
No Credit Card, No Interest Cuts
Nowadays, most employers pay their employees electronically. Plus, you can buy a product or service with your credit card at the store but there’s a catch to this. You’ll be slapped with unnecessary interest cuts that can be a huge pain on your end.
It’s even worse if you don’t have a second job. Even if you’re lucky to have a side gig, the financial burden may still weigh in on you eventually. As much as possible, pay using cash whenever you can. You’ll be safe this way.
It may be a little tough at first but focus on the greener side of the fence. It will be the end of interest cuts and the beginning of financial freedom.
“A penny saved is a penny earned.” So they say. But doesn’t this open up a Pandora’s box of conflicting viewpoints?
Most people share the belief that earning more money is way better than frugality. Others believe that you don’t necessarily have to make more to get rich fast. Both sides have reasonable arguments.
When one decides to save his/her money, they are simply preserving their wealth. When you earn an extra income, you’re adding to the wealth you’ve already accumulated. You make more money by creating more wealth.
Therefore, you really don’t have to pick which side of the fence to sit on. If you really need to create more wealth, balancing the best of both worlds (saving and earning an extra income) will be truly worth your while.