When Your Budget Goes Awry
Caroline looked at the Excel spreadsheet on her computer with increasing dismay. "Just three months ago I was able to balance my budget, but now I'm short again by over $15,000," she grumbled to herself. "No matter how hard I try, I just can't seem to keep up with my expenses."
She reflected on all the developments that had occurred in her life in the preceding months. Her grandmother, with whom she was raised, had fallen seriously ill. As her only relative, Caroline had taken on the task of caring for her, which had thrown her once tightly controlled budget into disorder.
Having another person in the house meant increased utility costs, and she needed to hire a housekeeper to help with the extra cleaning needs. In addition, she had to buy her grandmother's costly medicines and pay for her doctors' appointments without the benefit of health insurance coverage.
Initially, Caroline used her credit card to cover some of the pharmacy bills, but after two months she realised that she was having challenges clearing the card balance. After consolidating several loans over a year ago, she was now desperately worried that she was headed back into debt problems.
Costs are constantly rising
For Caroline, the sudden requirement to become her grandmother's caregiver threw her budget out, because she had little advance opportunity to adjust her spending pattern. It can be difficult to quickly recover from unforeseen or emergency expenses which you really cannot avoid.
Even if you don't have an unexpected demand on your income, the inflationary situation in our country can put your budget under major pressure. With the Jamaican dollar plummeting to new lows against its United States counterpart, we are experiencing the resultant increases in prices across the board.
Many people who try very hard to stick to their budgets are finding it frustrating to cope under these financial conditions. What can you do when your costs continue to rise rapidly and your income stands still? Let's look at some strategies to deal with this challenging problem.
Step 1: Cut back
When you use a detailed budget which lists all your expenses for a year, and keep track of your actual monthly bills, it's easier to identify when increased costs have unbalanced your budget. If you don't have one, you can download a comprehensive budget tracker at www.financiallysmart.org.
First, you need to go back over each spending item and determine how best you can reduce or eliminate the expense. For example, if you purchase the full-service cable package, you can change to the basic plan, or suspend your account temporarily until your financial situation has improved.
Despite the call to conserve on utilities, some of us still haven't switched from incandescent bulbs, and we keep the faucet running continually while washing dishes. Look at how you can improve your daily practices, in a bid to lower your costs.
Step 2: Get creative
If you have scrimped as far as you possibly can but your budget is still in trouble, then you need to apply a little ingenuity. There are some expenses that you cannot completely remove such as food and transportation, but you can try to find creative ways to get them done less expensively or for free.
Let's say that taking the bus to work is not an option, so you have to use your car. Can you find a few persons heading in your direction and have them pool funds to offset your petrol bill? Try walking instead of using the car for short trips.
To lower your food costs, plant vegetables and seasonings in your backyard or in pots on your patio.
Bartering could also be used to reduce costs. Most of us are in financial difficulties, but we can still help each other. For example, you could make meals for a colleague in exchange for exercise classes. With a little imagination, you can find ways to assist your friends to cut costs and receive help in return.
Step 3: Earn more
The reality is that despite your best efforts to cut back or be creative, you may still be unable to meet all your expenses, put aside savings for the future and enjoy life to its fullest. If you want to be successful with accomplishing all your financial goals, you will definitely need to look for ways to earn extra income.
I've heard all the excuses that people give why they can't do anything to make more money - no time, no talent, no temperament. However, if you are determined to do whatever it takes to have the funds you need, then you can overcome any real or perceived obstacles in your way.
Your budget will allow you to calculate how much extra money you need to earn each month. Then you need to break down that figure into a manageable weekly or daily figure for your income target. In Caroline's case, she would need to earn $3,750 per week or about $500 daily to balance her budget.
Once you have a targeted amount of income you want to earn, you have to consider how many customers you need to obtain or units of sale to make to arrive at your target. So every day, Caroline could sell five items or services for a profit of $100 each, in order to generate her required income.
Next week, we will look at different opportunities to earn more income to overcome your budget blues.
Cherryl is a money coach, business mentor and founder of Financially S.M.A.R.T. Services. Her upcoming book, "The 3 Ms of Money" will reveal all the secrets she learned about financial success. Read more on money and business matters at financiallysmartadvice.com and entrepreneursinjamaica.com. Email comments to firstname.lastname@example.org.