When you make the commitment to get control of your finances, one of the first things that you have to do is to take a no-holds-barred look at your budget. When we did this, we found that we had so many financial obligations each month, that our entire paychecks were pretty much spoken for the moment that they hit our account. Many folks find themselves in an even worse situation, with a monthly cash flow that is actually in the red. If this sounds like your situation, then you may have reached the point where it is time for drastic action. We all know that operating with a negative cash flow is not sustainable, unless you are the US government (sarcasm, obviously) .
Of course, I should note that if you are in debt, fixing your cash flow is only the beginning. Moving from the red into the green doesn’t mean you will suddenly be empowered to go out to eat every night or start shopping at the high end department stores. Instead, it means that you the extra money that you have can be applied to start eliminating your debt, so that you can improve your cash flow indefinitely.
Start Hustlin’ For Additional Income
It takes a multi-tiered strategy to start bringing balance to your budget. One of the best places to start is to try to find ways to increase the amount of money you have coming in. The ability to scrap and scramble for extra income should be a weapon in everyone’s arsenal. My own skills in this area didn’t really mature until I had children, but I have learned to pull a few rabbits out of my hat from time to time. We documented one month where found ourselves hustling a great deal, back in August.
The term “side hustling” is meant to describe money that is earned outside of your normal employment. This can include taking on additional work (like perhaps delivering flowers around Valentine’s Day), converting your natural skills and hobbies into side income, or locating focus groups or online survey companies that will pay you for your opinions.
Sell Your Stuff
In addition to taking on additional work, many people are sitting on a pile of cash and might not even realize it. A big part of getting out of debt is shifting your mindset away from thinking that material things can bring you a lasting happiness. If you have items in your home that you are not using, you should be willing to explore selling these items in order to bring about a better financial situation. We did this recently when I made the decision to sell my electric guitar and amplifier, that I wasn’t using at all. It wasn’t an easy thing to do, but the money raised brought us that much closer to becoming debt free.
Ask For a Raise
Perhaps even before you start selling your things, it would be wise to find out if you are maximizing your earning potential in your current job. Wouldn’t you find it a bit frustrating if you learned that your co-workers was making more money than you for doing the exact same job? It is a fairly common occurrence, and is certainly worth your time to look into.
Even if that doesn’t describe your situation, you shouldn’t be afraid to ask your employer for a raise if you feel that you deserve one. Even if your true motivation is to help improve your family’s cash flow, your appeal needs to be based on real world job performance, and you should be prepared to state your case as eloquently as possible.
Slash Your Expenses
The first three examples referenced above are all related to finding ways to increase the amount of money flowing into your budget, but just as important in the process is finding ways to cut your spending. We dedicate a lot of time here at See Debt Run talking about the ways that we have driven costs out of our monthly budget, and nothing should be off-limits. Take a look at your bills one by one, and comparison shop where applicable. Are you really watching all of those television channels you are paying for? Is there any reason why you keep your home phone line around, when you and your wife both have cell phones? Would you consider keeping your home a few degrees cooler in the winter in order to save some money?
Of course, the cost savings opportunities extend far beyond these fixed costs. When it comes to your expenses for food, gas, clothing, diapers and more, take a long hard look at where your money is going to see if you can find better and cheaper ways to get things done. The archives on this site are full of great ideas if you need help getting started.
Refinance Your Home Loan
We recently wrote about how we ended up refinancing our home twice in just over a year, because the savings and overall effect on our monthly cash flow was just too good to pass up. If you haven’t considered this option for yourself, I cannot recommend strongly enough that you at least take the time to look and see what rates are available. It only takes a few minutes to check out a site like Mortgage Rates Canada, to help and see what effect a refinance could have on your family’s cash flow.
When we first refinanced over a year ago, we were amazed at how low the interest rates had dropped. When we looked again just a few months ago, they had dropped considerably further. The net effect of our refinance was that we were going to save over $50,000 in interest payments over the life of the loan. If you combine the mortage savings (MortageRates.ca) with the additional income and spending reductions discussed earlier in this article, your cash flow situation can start improving rapidly, and then you will be well on your way.