I know that for many of us, the beginning of the year is the time we start looking over our finances, try out a new budget, or just try and figure out what we are doing wrong and where our money is disappearing to each month.
I know that many people make new years resolutions but I don't really feel like re-evaluating your budget is a resolution (unless you are resolving to spend less!). Instead, it's a way to re-evaluate your situation, figure out your goals and where you want to be in X amount of years, and how you want to get there.
Many of us this year (due to job less, different jobs, rising costs in other areas) will realize we are living outside of our means. How do you figure that out and what are you supposed to do about it? Let's start with the figuring out if you are living beyond your current income first, it's fairly simple to determine.
First figure out the minimum you will bring in each month from all sources. This amount should only be your guaranteed income. Don't add in commissions, bonus', ect. Total this all up.
Then add up your bills. At the top of the list write all the bills that are the same amount each month and that you have to keep paying. (I know that phrase sounds odd but stick with me here!) Write all the rest of your bills on the second half of the bills list. (All the variable bills or things like electric, ect.)
Now make another list and write down all your debts in this list, even though they are included in your bills list. (Credit cards, loans, ect.) Make sure to list what you owe each month and the total you owe to be able to pay off the bill.
Total up the second column.
Now the first indicator that you are living beyond your means is if the second column equals more than the first. If that's the case you have a problem.
But now even if your second column is less than your first column you still might have a problem. How much is the difference? Is it less than $100? Does it make you uncomfortable? If you answered yes to either of those you are also living beyond your means.
Now before your anxiety level goes up let's get to the next part of our post...what we are going to do about it. Here is a list of tips that we have personally used when we needed to make a big change to our budget.
Start by looking at your variable bills, can you make them lower? Can you get rid of a cell phone or a tv service or lower your electric bill? Lowering these bills will help you gain a small mount of wiggle room in your budget.
Can you raise your income? If you really enjoy your job and you work hard can you ask for a raise? Can you pick up an odd job on the weekends? Can you start selling something from your home?
If you can't lower any of your bills the easy way and if you can't think of a way to bring in more income you may have to do something more drastic. It may not be pleasant but would you rather live the way you are now with the stress of finances hanging over you or would you rather be a little uncomfortable for a while until you make your situation better?
Some serious solutions to lowering your monthly costs could be:
- Selling your house and renting, or living in another alternative method.
- Look for a new job altogether. (That makes more of course, or that gives you enough time to get another part time job.)
- Get rid of your cell phone altogether. If you really need one buy a pay as you go phone and limit when you use it.
- Get crazy about growing your own food. If money is this tight grab the cheap seeds (the ones for like 4/$1 at the store!) and dig up some dirt from your backyard and get growing. This is guaranteed to save money any time of year if you are committed! (See my post on Container Gardening)
- Don't buy new things at all. Mend clothing to keep it functionable and if you absolutely need something only shop at a rummage sale or thrift store.
Now even if you do these serious things you still won't be getting ahead unless you are using the extra money to pay off existing debt. Make a goal of when you want this debt paid off by and post your goal somewhere you can see it often. This will keep you motivated and working harder until you reach that better quality of life!
What's next? Dive into various ways to save money on Little House Living!
Do you personally think it's better living the same lifestyle you live now with no extra money or being a little uncomfortable and making changes for your future?
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