Suffering from a lack of cash? It's likely that you don't follow a budget that reflects your earnings. Smart budgeting prevents eviction, increased credit card debt, and ruined credit scores. It's never too late to achieve your financial goals—get started now with these 9 steps to make your financial life less stressful.
Adapted from Reyna Gobel, Investopedia
Avoid immediate disasters. Don't be afraid to request bill extensions or payment plans. These requests are often granted. If your biggest worry is getting evicted from your apartment, talk to your landlord, but, also, see if you can get extensions on any other expenses to free up money for keeping your home. For instance, you’re a few thousand pesos short on your rent. If payments for your phone bill, cell phone bill, electric bill, and cable bill can be postponed, you can use it to augment what you’ve set aside for your rent.
Review credit card payments and due dates. If you are only making the minimum payments on your credit card(s), you are flirting with a disastrous credit score. However, avoiding credit card payments will only worsen your debt. For example, suppose that your minimum payment on a P30,000 balance is P1,500. You fail to pay it on time, so you are charged a late fee. In addition, your interest on future charges is charged. Now your credit card is even more difficult to pay off. Before you know it, you have an overwhelming collection of piled up late fees and missed payments.
Ignore the 10% savings rule, for now. Stashing 10% of your income into your savings account is daunting when you're living paycheck to paycheck. Balance your budget before starting incremental savings. It doesn't make sense to have a couple of thousand pesos in a savings plan every month if you are fending off debt collectors. Your piggy bank will have to starve until you can find stability in your finances.
Review your past month's spending. Online banking and online budgeting software help you categorize spending so you can make adjustments. For instance, with online banking, with a few mouse clicks you can categorize your money for expenses, such as dining, food and utilities.
Negotiating credit card interest rates. If you have good credit, call your credit card companies and ask if they give an interest rate reduction. If you don't ask, you won't know, as it's unlikely that credit card companies are going to initiate a reduction on their own.
Eliminate unnecessary expenses. Do you need to cut back on coffees? Or movies? Or do you often have spoiled groceries? All cutbacks should start with items you wouldn't miss, such as switching car insurance companies to get a cheaper rate, or reducing your fresh food purchases if you find food spoiling before you can eat it. Eating out is even more costly, so examine how much and how often you really need to do this.
Journal new budget for one month. Once you've gone through the previous steps, monitor your progress by journaling for one month. You can do this by noting everything you spend in a notebook, budgeting apps on your phone, or with financial software. How you track your money isn't as important as how much you are tracking. Focus on ensuring that every cent is tracked by dividing your expenses into categories, such as rent, food, clothing and utilities.
Adjust spending as needed. If, after journaling for one month, you've found your budget isn't where it needs it be, get prepared to make changes. Look at how much you are over budget and decide where you can cut. Don't rule out items that are viewed as basics, such as groceries, utilities or rent. Cooking from scratch can eliminate the cost of pre-packaged foods, and opting for generic brands over brand names will equal big savings on a cart of groceries. Utilities can be reduced by employing energy-saving habits. You may be able to negotiate better rent the next time your lease is up, or you could always move to a less expensive place.
Seek out new sources of income.
If your current budget doesn't balance or you're barely scraping by, you may need to look at working overtime, getting a second job, or possibly getting a new, higher-paying job. Often there is work that pays more, but the nature of the work is unattractive. You may need to decide if it's better to be unhappy at work or unhappy with debt. When you're short on cash, a strict budget is your best tool for correcting your situation. Employing sound money management can mean the difference between financial disaster and financial stability.
About the author: Reyna Gobel is a freelance journalist and self-professed financial geek, who realized in her finance classes that personal finances weren't nearly as complicated as she thought they'd be and set out to spread the word.Gobel is also the author of "Graduation Debt: How To Manage Student Loans And Live Your Life" (2010). Her website is Graduation Debt.
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