Figuring out if you have an income or spending issue is important while on your journey to financial freedom. So let’s start with some definitions.
Income - a person does not make enough to live
Ex: Usually someone who is living near the poverty line or someone who is responsible for more than themselves but is not making enough to pay household bills, a car, etc
Spending - a person makes enough to live but has an issue with spending more than they make
Ex: Usually a person who pays all of their household bills and then balls out on the remaining money and is either late or only making minimum payments on debts.
Income issues are a real problem in America and there are things that can be done to alleviate or lessen the burden. Finding a new job is always an option or working a second job. One way to increase a person's pay is to increase their knowledge whether through college, trade school, or just learning a new skill. Education comes in many forms and could be as simple as learning a new skill.
Spending on the other hand is something that can be addressed through coaching. If you haven’t already, then I suggest that you sign up to receive my 3 Free Budgeting worksheets. Open your bank statement and get to filling it out. I guarantee if you are like most people you spend way to much on Food whether it’s eating out or simply groceries. The only way to understand if your issue is related to spending is by tracking your behavior. This is normally done by budgeting. There are many ways to budget. You can go at it alone or use a fee app like mint or hire a coach. The point is that you make an initiative to track your spending so that you can address potentially issues.
Let’s say after filling out the worksheet you notice that you spend about $200 on beauty products a month. Unless you are a beauty influencer and your job is to use and review these products, $200 is to much for Beauty products. But since you took the time to review your monthly purchases or expenses you now are aware that you could be using $150 towards saving for that trip you’ve been wanting to take or paying off the credit card that has a $500 balance at the end of each month.
If you think you can pull this off without a budget, then be sure to check out my previous blog posts 3 Benefits of Budgeting.
Spending more money than you make can lead to you constantly digging yourself into more debt. Just because you pay off one debt doesn’t mean you should jump into another. Take the time to create a plan for small or big decisions and I promise you that you’ll see a difference.