With the recent increase of gasoline and more expensive food prices, it is more and more important to build a good chunk of cash for unexpected emergencies.
For instance, it has rained a lot here in Toronto and yesterday I discover a water leak right above the garage. Result: another unexpected expense of around $500+ to fix the leak.
Here are some simple tips to help you increase your cash flow:
The first step you want to take is to get rid of your credit cards.
You want to pay with cash only.
Cash allows you to keep track of your expenses and you will make sure you are not overspending.
One great tip you can utilize, is to cash your income check and then put the money in envelopes.
Have an envelope for bills, another one for different expenses, and a third envelope for debt.
Seal the envelopes immediately and only use the cash that you allocate to expenses.
This will ensure that you are staying on track and not moving away from your game plan.
If you use up the cash, you’ll know!!
1. Avoid Late Fees
One common problem with a lot of people who struggle with debt is they rack up late fees every month.
Failure to pay bills on time can come with a 10% penalty (or more).
These penalties add up over time and can become quite costly.
Make sure you either enroll in automatic billing or you pay your bills on time.
Every dollar counts when you are trying to save.
Put a reminder on your smart phone or on Google calendar.
2. Avoid Shopping Sprees
The greatest problem that people face when they are trying to save is staying disciplined.
They will go weeks or even months sticking to their game plan and making great progress.
They will cut spending down to the bare minimum and increase their cash flows.
They are headed for guaranteed success, only they never make it there.
All it takes is one shopping spree to undo weeks or months worth of progress.
Make sure you stay disciplined and avoid websites or stores were you will be tempted to spend.
3. Cutting the Fat
Now that you have your bad habits under control, we need to begin cutting your expenses.
Cutting expenses is the way to go.
Cutting expenses is much easier than increasing your income.
Increasing your income can take a great deal of time and might not be possible at the current moment (if you want result fast).
The best thing is do both: increase income and cut expenses
But cutting expenses is something that everyone can do.
You would be surprised at what you can cut if you really break down and analyze where your money is going every day.
4. Food and Other Necessities
The first expenses that we are going to look at are food and other necessities that you need to live on.
These are expenses that you need to have in order to continue living a healthy lifestyle.
How much do you spend on food each month?
How often do you go out?
Do you cook your own meals?
Cooking your own meals will cut down on your expenses and you will also be healthier as a result.
An excellent resource for recipes is Once Upon A Chef.
I’ve tried a couple of the recipes and they came out yummy the first time I try.
Buying groceries in bulk can also be a great way to save money and cut down on expenses.
Just make sure you only buy what you need.
No point buying food in bulk but end up throwing it in the trash can because it went bad.
Remember the object of cutting down your food expenses is not to make you eat ramen every night.
But remember that saving an extra $5 a day can add up to $150 a month.
That $150 will go a long way to paying off your debt.
Every dollar counts so really dig deep and try to find ways you can cut your budget.
5. Recreational Spending
Recreational spending is your “fun” money.
Unfortunately, most of these expenses can be and will need to be cut out of your budget.
This part of budgeting is not fun at all, but once you have your finances under control you can slowly begin to add these activities back into your life.
You can also look at cheaper ways to have fun.
Have friends come over to your place instead of going to clubs or restaurants. You get the idea.
While fixing your finances will not be cool, you will soon eliminate your debt and free yourself from the stress that having debt brings.
6. Spending on Gas and Cars
One way to save cash each month is to look into reducing your monthly spending on gas.
Gas is one of the larger expenses you will encounter as a car owner.
If you live in a city or you are close to your work, we recommend you ride your bike or take public transit.
This simple method has saved many people hundreds of dollars a month.
This really is a simple technique that save you money and make you healthy at the same time.
Even if you can save $200 a month on gas, that is large amount of cash you can allocate to debt.
Look into commuting with a co-worker.
Even if you save $50 on gas it all adds up. $20 here, $50 there it all adds up quickly and will allow you to get rid of your debt at a faster pace.
7. Spending On Clothes
Us ladies like to spend on clothes!
A simple trip to the mall can result in hundreds of extra dollars in unscheduled spending.
Stores are designed to make you buy products and are constantly advertising sales.
20% off! Buy one get one free! Purchase at least 50 and get a gift!
Clothing purchases need to be removed until you have your finances under control.
The best method for controlling your purchases is to avoid stores and other places where you may feel like making impulse purchases.
Even at home avoid browsing ecommerce sites. Cut that temptation!!
8. Testing Out Different Scenarios
The best way to find your comfort zone for expenditures, is to test out different scenarios.
Eating Ramen noodles every night? Forget it.
The best way to do this is to start off with the smallest budget you possible can.
Eliminate everything but the essentials for survival.
Try this budget out for a week and see how you do.
Surprisingly, many people can actually live on a very tight budget.
The problem is nobody ever tries to live below their means.
If you find your budget is too difficult, then expand it a bit and test again.
You want to find a budget that is personalized to your situation and personality.
No one is a cookie cutter so cookie cutter solutions is not ideal.
But you need to remember that in order to clear your debts you need to make sacrifices.
The more sacrifices you make, the quicker you will be out of debt, and the faster you can reward yourself with a debt free lifestyle.
So keep that in mind when you are budgeting your expenses.
9. Sticking to the Plan
By now you should begin to have a good understanding of what expenses are necessary and where cuts need to be made.
The most important part of this plan is that you make your monthly expense budget and you stick to it.
You may test out different scenarios for a few weeks, but once you find one that works, you need to do everything in your power to stick with it.
All the best in your quest to kill that debt monster!!