With the cost of living off a moderate income increasing every year, it’s a big challenge for working professionals to make their paycheck last for more than two weeks, which leaves many in the lurch and leads them into an endless cycle of credit card debt.
If you’ve been falling short of cash every month and don’t want to be trapped in debt forever, here are five tips that will help you manage your income more efficiently so that you can have some control over a seemingly never-ending cash crunch.
Manage and track your weekly expenditure
Financial planning is all about getting into the minutest details to figure out where your money is going and which of those expenses can be cut without downgrading your lifestyle. You will be surprised at the insight you get once you start listing your income and expenses and tracking the heads that are usurping a large part of your income and those that are indeed essential for you to live comfortably.
Use an excel worksheet or, better still, download an expense management application on your smartphone for real-time tracking.
Learn to differentiate between wants and needs
Chances are you already know your wasteful expenses from the essential ones. The key is to exercise self-control, decisively categorize expenses into wants and needs, and avoid spending on things that are not a necessity.
To start with, do this on a weekly basis—tell yourself that you won’t spend on a want for a week, and take it from there. Breaking down financial decisions and goals into smaller accomplishments greatly increase your chances of successful money management.
Cut down on food and transport costs
These are essential expenses, but that does not mean you cannot reduce the portion of your income you spend on these heads. So how does one save money on food? To begin with, start carrying homemade food to work and to other places where you can skip eating out. For example, if you’re going to get a haircut and may end up buying a burger on your way back, why not pack a sandwich instead? Also, make it a habit of carrying a bottle of water to avoid buying packaged water. Another effective way to cut down your spending on food is by redoing the way you do groceries. Shop on days your local store offers discounted prices and steer clear of junk snacks.
Similarly, cut down on fuel costs by taking public transport or by carpooling—at least two days a week if not every day. Get a bicycle to travel short distances—it will keep you fit as well. The idea is to adopt a lifestyle that helps you save money effortlessly slowly.
Reduce your use of a credit card
When you pay everywhere with a credit card, it’s easy to overspend even when you didn’t intend to. Stop using your credit card for a week and pay everywhere with either cash or your bank debit card.
Carrying cash may sound a bit cumbersome; however, paying with cash is a tried and tested technique to wean yourself off the habit of overspending and to shop within your means—it makes you more conscious of your buying decisions and inculcates a habit of controlled spending. So take a temporary break from credit cards and see how it helps you in managing your money better.
If you do fall short of cash because of an unexpected expense mid-month, avoid using your credit card and take out an online payday loan instead. This way you can avoid falling into the cycle of credit card debt as online payday loans need to be returned when your next paycheck arrives.
Make friends with compulsory savings
Lastly, stop shying away from compulsory savings because of the fear that they’ll leave you in a cash crunch. Set up a recurring deposit with your bank that will automatically take money from your salary account on a fixed date each month. Pick an amount of your choice—even a $50 monthly deposit will leave with savings of $600 after a year. Compulsory savings are a great way to set aside money for contingencies and recreation.
Exercise these tips for at least a couple of months and as results start showing up, tweak them to suit your lifestyle; however, don’t lose sight of the fundamental rule—spend only what you have and always be on the lookout for needless expenses eating into your pay.