Monica's Money Management Blog
When an individual or family faces reduced income, immediate action should be taken to stop excessive spending. Whether the situation is temporary or extended, you need to get the most for your money.
Studies have found that many do not adjust their lifestyle for about six months after their income is reduced. Those six months of ignoring a situation can cause financial disaster. Following basic money management principles can reduce stress and help you adjust to living on less income.
If you aren’t utilizing one yet, now is a great time to create a spending plan. A spending plan, also known as a budget, is the equation that your income should equal your expenses plus the amount you save each month. This helps determine where your money will go. Developing and using a spending plan can help you cope with your income situation.
Typically, it is easier to cut expenses than it is to increase income. Make a list of your most important expenses. Most people give high priority to fixed expenses, such as rent or mortgage payments, insurance premiums, car payments, and debt repayment, and find it easier to cut back on flexible expenses, such as food, utilities, clothing, and household expenses.
During challenging financial times, it is very important to control spending. Recognizing the difference between needs and wants is a significant part of those flexible expenses. Before buying an item, ask yourself if you can do without, postpone the purchase, make it yourself, or substitute a cheaper option. You can track your daily spending to see where your money is going and restrict purchases to necessary items only.
Once you have a spending plan, stick to it. With less income, each spending decision is critical. All family members need to work to reduce spending. When everyone pulls together, you are more likely to succeed when living on less. Communication and your spending plan are the keys to success.
Spending plans should have some flexibility as our society is facing rapid changes. Be open to reworking your spending plan to meet your needs as changes happen.
While amid a challenging situation, borrowing or using credit to pay bills often brings only temporary relief. Thinking further down the road, try to minimize and control your spending so you aren’t left with an extreme amount of debt in the future.
Resources on creating a budget and tracking daily spending can be found online at: https://www.rivervalley.k-state.edu/family_resources/budgeting.html. Information on financial management during the COVID-19 pandemic can be found here: https://www.rivervalley.k-state.edu/covid_19/financial_management.html.
Contact Monica Thayer, Financial and Family Resource Management Extension Agent, at 785-527-5084 or firstname.lastname@example.org with questions on your financial management.
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