Facing a tight budget? You are not alone. Did you know that many people live paycheck to paycheck? Per CNBC, 58% of Americans fall into the category after inflation spikes, including 30% of those earning $250,000 or more. During difficult economic periods, it is tempting for people to rely on credit cards to bail them out. However, using them and not being able to pay them off monthly creates a snowball effect where debt keeps rising. As a result, high balances and interest payments become difficult to manage, increasing financial instability. So, what’s a person on a tight income with expenses to do? Creating and sticking to a budget is key to getting and staying out of debt.
Concerns over finances can make people want to bury their heads in the sand, especially as bills mount. However, that is a sign that it is time to take the horse by the reins and act responsibly by reviewing finances and seeking creative ways to curb spending. Homeowners are called to review what money comes in, such as income and earnings, and examine what goes out, meaning expenses and payments. It’s often easiest to create monthly budgets, however, when you review the numbers, be sure to include everything. Remember not to overlook irregular expenses, like insurance, that may be quarterly, annual, or bi-annual rather than monthly. The goal is to have your income exceed your expenses, with some money to build savings. Seeing where your money is going in print often provides clarification and can be the catalyst for inspiration.
When income and spending are out of whack, two main solutions come to mind; earn more money or decrease expenses. For those in the hole, meaning that spending exceeds income and debt is occurring, changes must be implemented to make ends meet. Just as folks seek healthy minds and bodies, people must also achieve financial fitness. To do so, we must learn to live within our means and be aware of our actions and consequences. Creating a list of household expenses gives homeowners the ability to see those which are necessary and those which are not. For example, eating is obviously an essential task but eating dinner at a restaurant is generally not. Decent budgets are structured to cover basic life needs. They also create new priorities in spending and help to trim unnecessary expenses in a push toward economic healthfulness.
There are many different types of budget plans. Among the most popular is the 50/30/20 principle, whereby 50% of take-home income (after tax) goes toward needs, 30% toward wants, and 20% toward savings and debt repayment. This plan works for many people because it is simple and helps people manage debt. Gaining control over money puts homeowners in the driver’s seat of success. To follow this budget, it’s important to distinguish needs from wants. Needs generally include basic food, shelter, insurance, transportation, minimum loan payments, childcare, and so forth. Wants generally include gifts, travel, entertainment, dinners out, upscale salon treatments, and more. For example, basic utilities such as electricity or water are necessities, whereas a bundle package of cable movies are wants. Minimal clothing generally falls under a “need,” whereas clothes in excess are “wants.” For older people seeking to get out of debt faster, focusing on needs and keeping wants under control can make a positive financial impact.
The word budget often carries a negative connotation. Sometimes it is because people choose to focus on the negative, what they can’t have, rather than what life gifts they possess. In part, this is driven by life in a material world. For a balanced home budget, it’s important for people to approach it with a positive mindset, developing a gratefulness for what they have. At the core, budgeting is not about restricting things, it’s about thinking smarter and doing things differently. Something as simple as the 50/30/20 plan enables people to free themselves of debt and worries over making ends meet. It also encourages them to create a little nest egg and put away money for unexpected surprises.
People who encounter difficulties budgeting, or are struggling to get their finances together, should speak to a qualified accountant or trusted family member to ensure they are receiving appropriate age-related benefits. They may benefit from a fitness check of their finances to make sure they aren’t carrying high-interest credit card debt, soaring mortgage rates, or paying for unwanted subscriptions or services they don’t need. Those facing low-incomes combined with high expenses are encouraged to be proactive when it comes to finding relief options, discounts, and freebies. Also take advantage of hardship programs, store coupons and sales, garage and thrift sales, free museum days and more. And, if one is physically able, it’s likely beneficial to pick up a temporary or part-time job to ease financial burdens and work toward fiscal freedom.
Senior citizens may be particularly vulnerable to financial insecurity as many live on fixed incomes. Thus, they may depend on family or professional resources for advice or guidance. Seniors who cannot afford utilities should seek advice from utility companies as they may be eligible for special programs. In addition, many local municipalities offer free bussing and other programs for seniors, so be sure to check out what’s available in the neighborhood. Some seniors are reluctant to use computers to pay expenses, however, automatic bill payments are generally helpful to avoid late charges. For aging seniors who are not able to handle their finances on their own, it’s important for someone capable to step in to monitor their accounts and provide guidance.
Getting one’s finances in order serves the most important goal of providing for the essentials, and the added benefits become icing on the cake. While running a home isn’t cheap, an organized household budget can create positive spending habits, reduce stress and anxiety, and even help homeowners save money for emergencies, a special night out with friends, a dream vacation or more. Whether you are improving your own financial health or reaching out to advise an older person seeking to maintain or extend their financial independence, it’s great to stay on top of things to ensure financial stability and success.