Do you find it difficult to make ends meet each month? Do you shake with worry when some unexpected major expense pops its ugly head? If so, you’re not alone.
An unsettling report came out back in 2011 that indicated that 64% of American households don’t have as much as $1,000 to handle an emergency.
Obviously, if your income doesn’t cover your expenses, you’ll find it almost impossible to build up an emergency fund – let alone save for your future. And actually, it’s worse than that.
If your budget is really tight, you can easily find yourself leaning on the plastic when difficult times come around. That can end up costing you big when it comes to finance charges and worse. It can also lead to a deteriorating credit rating.
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No doubt about it. When your income fails to cover your expenses, dramatic action is required.Increase Your Income
This strategy is easy to recommend. But many people find it really difficult to do.
Still, if your income isn’t covering your expenses, this is an effort that needs to be considered. If you give it a try, you may find that it’s far easier to do than you might think.
There are several different ways you can approach this solution:
- Take a part-time job
- Start a side business
- Take paid work anywhere you can find it
- Work any paid overtime that is offered at work
- Take advantage of any bonus opportunities that your employer offers, including customer referrals, or new employee referrals
- Work to improve your job skills to get a promotion in your current position
- Get a new job that pays better than your current one
These take work and you may have to be patient before the cash starts rolling in. But each – or a combination of several – can provide you with the extra income that you need to cover all of your expenses each month.
Cut Your Living Expenses
This really should be your first strategy to implement if your income isn’t covering your expenses. It’s certainly much easier to see results by cutting expenses than by scrapping for more revenue.
But it will be even more effective if you cut costs and increase income. In that situation, you’ll be improving your monthly budget with both the income and the expense side, which should help to produce the desired result.
How much expense cutting will you need to do?
That all depends upon how big the difference is between your income and your expenses.
If the difference is small, you can simply cut around the edges. That might mean all you have to do is make relatively small cuts, such as reducing the number of meals that you eat outside your home, shopping for bargains and clipping coupons, and achieving reductions in your home utility costs.
However, if the gap between your income and expenses is particularly large, you will need to take a look at cutting some major expenses.
This could mean replacing a late-model car – one that has a monthly payment on it – with an inexpensive used car that you can buy without taking a loan.
Under extreme circumstances, you may even need to consider downsizing your house payment. That could involve moving from a home that you own (and can barely afford) to an apartment, or moving from one apartment to a less expensive one.
Either can be a drastic move, but drastic situations require drastic action, and may be a necessary part of your financial recovery.
While some of these ideas may seem draconian, rest assured that the relief you’ll feel as a result of getting in better financial balance far out-weigh the temporary discomfort.
In other words, this may sting for a little while. But the payoffs dwarf that discomfort. Trust me on that.
Lower Your Debt
It’s very possible that the only reason you currently struggle is because your debt payments are just too high.
To solve that problem, use any extra money that you have either from earning additional income or cutting expenses to either pay down or payoff any debts that you have.
Paying down or paying off debt is a way to achieve permanent reductions in your cost of living because it reduces finance charges.
Just make sure to use all that extra cash you worked so hard for to pay off those debts friend. Don’t go crazy with that new found money and blow it on new toys or vacations. Bad move Pilgrim.
Lower Your Debt Costs
If you can’t eliminate your debt, at least refinance it. There are a number of ways to take expensive debt and refinance it with lower cost debt.
Do that, and it will create “found money” (the extra cash you save by paying a lower rate) you can use to extinguish your debt much faster.
Being Stuck in a Debt Trap
Debt is really a four letter word. And it could be the reason you are not having as fun in life as you deserve. Debt has a way of spinning out of control and gobbling you up.
Even if you start out with a small amount in the minus column, if you borrow money every time you need extra cash, your financial situation will get progressively worse.
Eventually you will reach a point where paying all of your monthly bills will become virtually impossible. You may find that you have to choose which bills you will pay each month, and let some others go.
That arrangement, however necessary it may be in order for you to survive, can clobber your credit, and take your credit scores down to a level were the interest rates on your debt rise so high that you can no longer afford the payments.
Eventually you will find yourself unable to borrow any more money, and then your situation will become even more serious.
When you have a considerable amount of debt, and a poor credit rating, you’re essentially stuck in a debt trap. It won’t be long before you start being hounded by creditors, as each lender looks to get at least some money from you while they can.
The best way to avoid this is to stamp out your debt right now and treat it as your enemy – because it is.
Deciding When It’s Time to Get Credit Help
If your debts have ballooned, it’s going to be next to impossible to get back on track until you deal with it. Your choices are negotiation, debt settlement or bankruptcy.
These are topics I’ll be writing about soon. But as I said, if the debt has become a monster in your life and you have no way of paying it off, you have to consider these options as soon as possible.
After you get rid of that debt shackle, you can get to work cleaning up your credit. But if you have overwhelming debt, credit repair won’t really help because as soon as you clean up one item, another creditor will mark up your report.
Don’t let your situation get this bad. If your income doesn’t cover your monthly cost of living, stand up and pay attention.
Then, get busy turning that situation around using the techniques I described above.
Are you spending more than you have coming in? What have you done to change that? What’s worked? What hasn’t? What are you going to do differently now?
This article originally appeared on CreditPilgrim.com and was syndicated by MediaFeed.org.
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