In times of economic crisis, you might lose your job through no fault of your own, due to your company downsizing. It might be impossible to find full-time employment at the salary you've become accustomed to. Closely examining your current income and expenses will help assess your financial situation. Having a budget plan and finding cost-saving measures also helps you to cope with the daily challenges low income presents.
Creating a Financial Plan
Monitor what you are currently spending. List all bills for fixed expenses, such as rent or mortgage, repayment of bank loans, and insurance payments.
Calculate the monthly portion of all bills. For example, if your car insurance is $2,400 per year, divide by 12 and record $200 as a monthly expense, even if you make the total payment once year.
Examine recent bank statements to determine how much cash you have been withdrawing. Take the average over the last few statements. For example, if you withdrew $1000, $650 and $750 over the last three months, record $800 as the average amount per month.
Determine where your cash was spent. List every cab ride, bus pass, restaurant bill, grocery purchase and everything else you can remember buying.
Examine your credit card statements. Determine how much was for fixed expenses and how much was discretionary. If you are making only minimum payments on each statement, record how much interest you are paying each month.
Total all your expenses for the month and compare this figure to the net income earned in a month. If current expenses exceed income, recognize you need to find ways to reduce spending or find an additional part-time job.
Set some money aside each week for unexpected emergencies. There will always be something that will occur such as home or car repairs and maintenance, or an unexpected medical and dental condition.
Finding Cost-Saving Measures
Prioritize what you need most. Examine all expenditures and determine what is essential. For example, food and shelter are usually the most important. Look carefully at how much discretionary spending you are doing -- this is often where most savings can be made.
Examine your cell phone plan and usage. For example, you might be able to manage without Internet access from your phone. Consider getting rid of your land line. If you're like most people, you probably don't use it. If you make lots of long distance calls regularly, switching to a VOIP line, which usually costs under twenty dollars a month, can be a big savings.
Reduce your gas or electric bills by keeping the house a few degrees cooler in winter and warmer in the summer, using less heating or air conditioning.
Scan newspapers and flyers for food coupons. Stock up on items when they are on special. Buy larger-sized containers when possible; they cost less per serving. Shop from a grocery list to reduce impulse buying.
Reduce the amount of money you spend on gifts. For example, if you are invited to many weddings or birthday parties, stock up on gifts when you see them on sale. Many gift shops have seasonal sales where you might be able to find crystal vases at deeply discounted prices. Create a coupon to give the gift of your time to family members who might appreciate your services as a babysitter rather than an expensive bottle of wine.
Buy second-hand clothing. Many stores sell good quality items at a fraction of the price for new. Check out garage sales before heading out to buy something that you need.
Change your habits: no more eating out in restaurants; brown bag your lunch to work every day; drink coffee at home. Calculate how much you can save by not buying that cup of coffee on the way to work each morning. It could save you as much as 30 dollars each month.
Give up drinking bottled water and switch to tap water. Invest in a reusable water bottle, fill it and refrigerate it. Or fill it halfway and place it in the freezer overnight. In the morning, fill the rest. Many people find that water takes better when it is very cold and you probably won't miss the taste of your expensive bottled water.
Find an exercise buddy who will walk through the neighborhood with you regularly or who will come over and work out with you to an exercise video. This partnerhip will motivate you to exercise regularly without needing an expensive gym membership.
Find alternate things to do for entertainment. For example, rather than paying admission at a movie theatre or theme park, look for creative ways to have fun with friends. Organizing a pot-luck dinner can be even more enjoyable than an expensive meal in a restaurant.
Items you will need
- Copies of all bills
- Credit card statements
- Bank statements, for last three to six months
- Income statements
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