Spending less money than you earn is what exactly defines financial stability, which is in fact a disturbing task in this distracting world. However with good patience, dedication and with a little bit of common sense you can control spending your money and work your way through attaining financial stability within six months.
Without further ado, let us get into the ways you can follow to set financial standards in your life:
1. Be within your Means
Set a financial boundary around you and ensure to remain within the boundary come what may. For that first:
Make a budget– Prepare a balance sheet and examine how you are spending your money against the amount of money you earn. You can make a realistic budget report by listing down your bills, mortgage, transportation expenses, groceries, child support, credit card payments and car payments.
Compare your Income with your Expenses– Measure your income and make sure it holds all your bill payments for the month. And this would include paychecks, dividends from stocks, child support, gifts, and inheritances.
Deduct your Miscellaneous Expenses from your Income- This activity will definitely tell you whether you are spending more than your income and if so keep a tab on the same to control it. Further make it a habit to prioritize your expenses.
Devise a plan to control your spending– Proactively reduce your spending and you will notice that you have enough money left than you expected. And you can use this saved money to build your emergency fund.
2. Control your Transportation Expenses
The annual cost to own and maintain a car is over $7000 per year and this includes the car maintenance, fuel charges, car payments and insurance. The transportation expenses can be drastically bought down by
Sell your car– the best way to save your income is to simply sell your car and use the public transportation to commute. We know it does sound a little too harsh; however it is the most sensible way to manage your monthly savings in the long run.
Use Rideshare or Uber– If you really need a car to get somewhere, use a rideshare or an uber.
Car Pool– if you are apprehensive about selling your car, you can also choose to car pool and thereby share the transportation expenses accordingly.
3. Manage and Control your Utility Bills
On an average Indians spent 28% of their salary on groceries, about 17% on housing and utilities about 16% on transportation. Simply control your utility bills and watch how your savings spike for the month
You can adopt the following ways to keep a tab on the monthly utility bills
- Get rid of the incandescent light bulbs and use compact fluorescent light bulbs (CFL) or light emitting diodes (LED) bulbs.
- Ensure to switch off the light and fan when not in use
- Unplug all your devices when you are not using them.
- Maintain a time to watch the television and ensure to keep it off when no one is watching.
4. Spend Less on Entertainment
Spending less on entertainment is the definitely the most sensible way to trim your expenses and don’t worry because you can find alternatives to your entertainment means. Here is how:
- Cancel your gym membership and instead choose to work out from home with fitness videos on youtube or go for jogging or biking in the park.
- Borrow books and movies from a library and cancel your newspaper and magazine subscriptions. Try to complete your reading from the library itself.
- Remove all kinds of paid services such as Amazon Prime, Netflix etc and indulge in reading or craft making during your free time.
5. Cook at Home
Manage your expenses and trigger your savings by cooking your meals at home. You can adopt the following options such as:
- Make a meal plan and ensure to cook your meals from home. This way you can stay healthy and save your money.
- Control your junk food intake and indulge in it once in a while, maybe once in 2 weeks or something.
- Purchase nonperishable items in bulk for a lower unit price.
- Pack your lunch to work instead of buying lunch every day.
- Make your own kitchen garden at home and give yourself a steady supply of vegetables.
6. Cut down on your Insurance Bills
Choose a highly-deductible health insurance plan if you are sure about your health and if you do not need any doctor visits. Find better rates on homeowners and auto insurance; also combining these two can save your money to a great extent. Opt for term life insurance rather than purchasing whole life or universal life insurance.
7. Create a Buffer in your Checking Account
Ensure to maintain a buffer in your account that should be kept untouched. It can be somewhere between Rs 500 to Rs 800 on a monthly basis. This is to help you in case of any unexpected expense, which will save you from using the credit card on an emergency situation. It is difficult to develop a habit of creating a buffer account, however it can be definitely done if you cut down on your expenses or find a way to learn a little extra income.
8. Start an Emergency Fund
An emergency fund is not same as a buffer account. This type of fund is something that holds more than 3 to 9 months of your income and is saved in case you face any emergency situations such as illness, accident, loss of job or major home or car repairs. Ensure to keep your emergency fund in a separate savings account where it earns interest. Do not be tempted to use it unless there is a grave need for it.
9. Supplement your Income
Find out ways to earn extra income so that you can break the dependence on credit cards and move away from bad debt that disturbs your financial build up.
10. Sell your Expertise
Are you an expert in an activity or hobby or do you have immense knowledge in a particular skill? if yes, then create a digital product to share your knowledge. E-books, online courses and blogging are great ways to earn passive incomes apart from your monthly salary.
‘Where there is a Will.. There is a Way’- follow this principle to stabilize your finances and before you know it you will have a strong savings account to support you lifelong.