By Jess Pearse
Mortgage payments, tuition, grocery bills, retirement contributions, and insurance premiums represent only a few of the wide-ranging expenses faced by household spending managers. Depending upon the scope of your spending obligations and the income available to cover living expenses, accounting for these and other financial commitments can present formidable challenges.
Even the best household spending managers face occasional difficulties, so don’t be too hard on yourself when cash flow problems arise. Instead, use a proactive approach to stabilize your finances and set the stage for future monetary success.
In addition to your own frugal solutions, take the following steps to keep your financial house in order:
Evaluate your household spending habits
A person’s financial responsibilities expand with age, repeatedly challenging money managers to keep pace with changing conditions. As a result, you may not always have your finger on the pulse of household financial affairs. To regain control and increase your general understanding about the way cash flows through your home, take a closer look at your spending habits. An old-fashioned accounting ledger is always a good start for a good reference. However, since more people are using electronic options and apps for budgeting and tracking their household spending, there are numerous options with extra features for tracking and evaluating your expenditures.
For the most accurate reflection of your outgoing spending, start by noting one week’s worth of expenses. As you become comfortable with the process, strive to capture a one to three month snapshot of everything you spend. Armed with this baseline reference, you’ll be able to pick apart your spending habits, with an eye toward savings.
Identify the underlying cause of cash flow problems
Occasional financial shortfalls are commonplace, calling-for creative budgeting solutions – which are typically all that’s needed to stabilize spending. When monthly cash flow shortages persist for more than a couple billing cycles, however, a systemic financial problem may be responsible.
Do you spend more than you earn? Is the cost of credit debt dragging-down your household budget? Have you made moves to rein-in expenses and find better balance? Turning a critical eye toward your finances and answering tough questions is the only way to isolate the most damaging aspects of your financial life. To root out the cause of financial imbalance, identify a monthly minimum spending threshold, representing expenses you expect to pay every single month. Housing expenses, for example, and other recurring costs are included in your must-have minimum monthly budget. With these important costs accounted for, it is possible to examine discretionary spending and identify the source of your money problems.
Make cost-cutting corrections
Repeating expenses such as rent payments and other monthly installments are not easily altered. For budgeting purposes, these should be viewed as the immovable foundation of your overall spending burden. Beyond these base costs, however, most budgets can be trimmed, creating better financial flow.
Discretionary spending includes money used for entertainment, travel, gifts, and other purchases you can live without. Although the goods and services are deemed necessary at the time of purchase, discretionary buys are not always in your best interest. Given the subjective nature of discretionary spending, your judgment should be put under review, before committing to these types of purchases:
- Clothing and fashion accessories
- Music and other entertainment
- Restaurant meals
- Subscription services
Commit to your financial health
Finding and maintaining financial stability are lifelong pursuits, achieved through dedication, flexibility and commitment to proven personal finance principles. Whether you’ve worked hard restoring your financial outlook, after challenges set you back, or are first carving-out your economic niche; a forward-looking frame of mind is your best asset. Each financial success adds to your experience and personal resolve, building assets and security you can carry into the future.
A balanced personal budget ensures your incoming resources are sufficient to cover spending commitments. Although unexpected expenses may occasionally blow you off course, sustained financial health relies on long-term equilibrium. Consistently spending less than you earn should be a top priority.
It is better to make major lifestyle adjustments, rather than succumb to the consequences of unmanageable financial pressure. Share expenses with a roommate for lower housing costs. Renegotiate student loan repayment to levels you can afford. Take a second job, even if temporarily…and so on. This ‘whatever it takes’ approach can help you avert crisis and identify areas for improvement. Once your finances are stable, a cost-conscious mindset and commitment to sensible spending pave the road to financial health.