On Wednesday, I posted the 2 main issues when it comes to money problems: overspending and under-earning. Hopefully, these answers seemed obvious to you, but the unclear area of money problems is the solution. If you are overspending, how do you identify the area that you can cut back on? If you aren’t earning enough, how do you make more money without losing sleep?
What Are Your Goals For The Future?
Unless there is a major catastrophe that is contributing to your money problems, I would say that nearly 100% of the cases are due to lack of vision and goals. Yes, you’ve heard it again and again… “You need to have a goal! Write it down and look at it every day.” These ideas have nearly lost all meaning because of the constant repetition, but let’s dig into it for a moment.
Do you remember when you were a kid? You’d be outside having fun and out of the blue, your mom or dad decided that you needed to come in the house. “Why?” you asked. Their response: “Because I said so!”
Because I said so… this has to be one of the worst parental phrases used today. The kid was having fun playing and he just wanted to know why he needed to come inside. The answer, “because I said so” gave him no real motivation to obey (other than the possibility of a lickin’!). The result? The kid might slowly sluff into the house with his head down, muttering to himself in anger.
What if the parents actually told the kid what was going on and turned a positive light on the situation? “Why do I need to come inside?” “Because dinner’s ready. I made your favorite; grilled cheese!” With that response, the kid will gladly alter his current state of enjoyment because of the goodness awaiting him in the near-future.
The same goes for us! If we have no real reason why we are saving money, chances are, we won’t ever do it! But, if we have a goal of living our retirement years in the Bahamas, we’ll most likely be a little more excited to sock that money away in our 401(k)!
Cut Down on Your Overspending
As hard as it may be, commit to tracking your expenses for one entire month. Then, organize them by category: food, shopping, auto expense, home loan, etc. Take each amount and divide it by the total monthly expense, which will give you the percent spent on each category. Your 3 largest expenses should be the mortgage (or rent), food, and auto (most likely in that order).
These 3 categories combined should equal less than 60% of your gross income. If they consume more than 60%, then we already have some work to do. Perhaps you should consider looking at other residences, or cut back on your food expenses, or maybe you need to sell the car and buy one with cash!
As for the rest of your expenses, please reference the table above. If you find that any of your categories exceed the recommended percent you should cut back immediately.
Create a Spending Plan
After you get a good handle on how much you spend in each category, you should create a spending plan. This merely means that you’re going to tell your money where to go before you even receive your paycheck! If you follow through with your plans, you’ll soon find yourself spending less frivilously and your habit of overspending will be cured! 🙂
Make More Money
If you feel like you have a good handle on your spending, perhaps you just need to make more money. There are so many ways to make a few extra bucks a month. In fact, I came up with 101 ways just by jotting some notes down for a few days (I later wrote an eBook based on this idea – it’s free by subscribing – which is also free).
Here are a few quick ideas for some extra cash:
- Detailing Cars – anyone can do it, but no one really wants to. You can buy the equipment for $15 and make $100 with only a few cars.
- Mow Lawns – if you own a mower, ask around the neighborhood. I’m sure you could easily make $20 per lawn.
- Cut Hair – without a license, you may be limited to family and friends, but if you’re good, you can quickly earn $10 per haircut.
- Pet Sit – This does not take that much extra effort, and the payout can be phenominal!
- Manual Labor – If you’re willing to get dirty, there are always manual labor jobs advertised on Craigslist. Work one Saturday a month and earn an extra $100
Get Back on Track
Hopefully, this advice will get you back on track and relieve you of your money problems. I know sometimes this advice seems simple, but really, personal finance is simple! Spend less than you make and you will live a successful life!
What additional advice would you give? What has helped you out with your money problems in the past?