Increasing monthly bills burn more than just a hole in your pocket. The ripple effect that these excessive bills create, causes so much distress in your interpersonal relationships and health. Such prolonged stress increases the risk of killer conditions such as heart attack, diabetes, depression etc. So the sooner you identify the trigger behind high bills and devise solutions to mitigate the same, the better it is for you!
So here are ABCDs of what you must do to avoid financial stress, when the bills exceed your income!
Look at cash inflows and outflows. If your expenses exceed your income, it means youÔÇÖre having a negative cash flow, which is not a good sign. Now you need to assess your assets versus liabilities position. This way you can analyse your net worth, which is the difference between total assets and total liabilities. This figure is actually a measure of your wealth, and should be on the positive side, where the assets exceed the liabilities. Analysing the cash flow and net worth statements can give a clear idea of where you stand financially. You can also run through a quick financial SWOT (Strength, Weakness, Opportunities and Threats) analysis to understand where youÔÇÖve been going wrong.
B- Break down
Now that youÔÇÖve analysed your financial position, you must break down the cash flow, net worth and other numbers to specific categories. Look at how much you are spending on categories such as housing (mortgage/rent, real estate taxes), utilities (water, power), food, clothing, healthcare, donations/charity, savings and insurance, entertainment, transportation (car payments, gas, service), debt payments and other miscellaneous expenses. Find out where youÔÇÖve been over spending.
C- Cut expenses
Here lies the biggest challenge! Cutting down expenses is not as easy as it sounds. It takes a lot of grit, self-control and resilience to do so. The first step in cutting down expenses is redefining necessities. Is it a necessity to buy the latest iphone model or to stay in the existing 3 bedroom apartment? You need to be absolutely honest with yourself to segregate wants from needs. Then go ahead and cut down unnecessary spending. Devise an austere spending plan and budget, and ensure you stick to it!
D- Decide on a plan
Create a rewarding downsizing plan that prevents you from spending money, at the drop of a hat. Make it more engaging, by challenging yourself into seeing how long you can go about curbing your urge to spend money.┬á
Now that you are equipped with the ABCDÔÇÖs of money management, get some rest and stop worrying about the expenses exceeding your income!