Does this sound familiar? Payday is two weeks away and I only have $50 left. I have to pay for parking, get gas, give the kids money, and get food for the house.
Perhaps something unexpected came up this month that had an impact on your finances. It is important to build an emergency fund for situations like this. As sure as you and I are breathing, we will be faced with some unexpected emergencies from time to time. It is recommended to save 3-6 months worth of living expenses for emergency purposes.
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If this is something that seems to happen on an ongoing basis it is time to examine your Financial Profile.
The first thing you want to do is figure out how much money is coming in (Income) and how much money is going out (Debt and other expenses). When determining how much money is coming in, always use you net income (money you receive after taxes and other deductions). To determine how much is going out, you should develop a Spending Record. Your checkbook is one tool you can utilize for your Spending Record. That is assuming that you maintain an accurate checkbook. In addition to your checkbook, you want to keep a daily Spending Journal on every dollar you spend during each day. This includes everything from a pack of gum to lunch at Wendy’s. Take the information from your checkbook and the information from your daily Spending Journal and develop your Spending Record. You want to compile one month worth of spending detail to get a clear picture of your Financial Profile.
Does your spending exceed your net income? Look to see if there are areas on your Spending Record that you can adjust for example (lunch, lottery, smoking, snacks, etc.)
When faced with the dilemma of expenses exceeding income, you have one of three choices: Increase income, Reduce Expenses. Often times there is a combination of both.
It is also important to note that when faced with this dilemma it is important not to accumulate any more debt.
Bear in mind that your current circumstance is temporary.
Below are tips on increasing your income and reducing expenses. These are just ideas to stimulate thought. Let your creative juices flow.
Tips on increasing your income
Modify your W4 form with your employer.
If you are receiving a good tax return ($1,500 or more) at the end of the year, maybe it is time to realize some of that money throughout the year. A change in your W4 form can do the trick. The more exemptions you claim on your W4, the less money they’ll take for taxes. This means more money in your paycheck. For example if your return was $4,500 last year and assuming nothing has change with your filing status, that is $375 per month extra you could have realized every month for an entire year. (Please consult a tax advisor. You want to ensure you don’t claim too many exemptions and end up owing Uncle Sam.)
Get paid for your skills
You go to work every day and have developed many skills. Why not utilize those skills to make extra money. For example: If you are an Administrative Assistant full time, there are many small businesses that can utilize your services. You can become an Independent Contractor for some of these companies and offer to do some administrative work. If you are a Police Officer full time, you can get some work as a security guard at many places and earn extra money. You may have skills outside of your normal line of business. Turn your hobby into a Hustle! Who know you may be an entrepreneur in the making.
Other income producing ideas
Look for a promotion or a new job making more money
Take on a part time job to supplement your income
Work overtime on current job if available
Sell valuables that are no longer being used
Take in a boarder or roommate
Temporarily suspend investing
Tips to reducing your expenses
Bill Consolidation also know as debt shifting
If you are a Homeowner and you have accumulated some equity in your property, maybe it will benefit you to consolidate bills into one lower payment. If you are not a homeowner, there are some companies that will do a bill consolidation. You will not find too many companies giving you an unsecured loan above $5,000.
Shop off season (Summer cloths in the winter time are cheaper)
Use coupons and double coupons
Email friends instead of calling
Brown Bag instead of going out to eat for lunch (This is my weak spot)
Take advantage of cheaper long distance on your cell phone
Consider Thrift stores/Yard Sales/Garage Sales (You will be surprised what you will find)
Buy Generic instead of name brand
Get on the Bus (Parking and Cabs are expensive these days)
Eat in more often instead of dining out
Read the newspaper online instead of buying (pick up a courier J)
Don’t spend your next pay raise, save it instead
Don’t go to the movies, rent instead
(Damon Carr is the owner of ACE Financial. He can be reached at 412-856-1183)
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