Having few or many streams of income requires proper finance management. When your expenses equal your income or in some cases exceed your income it is synonymous to filling a basket with water, no matter how much you pour into it, you keep losing it.
Now you know your financial status as practiced from the last post. If you missed it, read it here. The next step is to either increase your streams of income which I would discuss in another post or manage your expenses.
Budget for expenses
To effectively manage your expenses, you need to make a budget. Keeping records of your expenses as many people do doesn’t cut it right because what you are doing is just making a list of what you spend on, it doesn’t change your position. What helps is, making a budget of the proportion or percentage of your income you want to spend on a particular class of expenses.
When you have a budget, it helps you restrain from and cut unnecessary expenses. If you budget $100 for gas or fuel as the case may be for a week, you wouldn’t jump at any opportunity to drive long distances for events that do not add any value to you. If you budget $100 for clothing, you would not buy a dress worth $200 on impulse just because it’s in vogue or a marketer shoves it down your throat.
This requires a lot of discipline and practice because there would always be a reason for you to want to spend more than you budgeted for. Remember that budgeting depends on your income, don’t ever budget above your income.
Track your expenses
A lot of people use apps or excel to track their expenses. Feel free to use any app of your choice. Now that you have created a realistic budget for your expenses, the only way to know how effective this exercise is would be to track your actual expenses against your budget.
Tracking your expenses helps you analyse what you spent compared to your initial budget. It also helps you know when and where you need to curtail expenditures in certain areas in order to achieve your financial goals.
At the end of every period, make notes, ponder on lessons learnt and decide what you need to do going forward to control your expenses in certain areas.
They only way to achieve change is to do something you have never done before. Now practice.
How do you manage your expenses? What works for you?