Some people spend more money than they earn. If you find yourself in the situation that at the end of the month, you end up spending all the income you have received during that month or, even worse, having spent more of the money you earn, you will be in a critical situation regarding your personal finances.
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Your Economic Health
In this case, the saving capacity you would have is nil. No matter how much you try to improve your financial situation, it will be impossible for you, since you cannot save absolutely anything. Moreover, as we already know, saving is the necessary preliminary step for investment and economic improvement. You have to consider the economic reality of the world in which you find yourself. Today, things in life are very expensive, prices are through the roof, and in many cases, most people’s salaries are not enough to face the column of monthly expenses that you have to face.
Your Monthly Budget
Facing this situation is not something that anyone wants. The first step in solving your financial situation is to budget for your finances. On many occasions, not having a monthly budget can cause problems of not making ends meet, even for households with sufficient monthly income. It is essential to know the nature of your income and expenses.
In your day-to-day, you usually have fixed expenses in mind. This is considered the cost that you have to cover from time to time on a periodic and recurring basis. Examples of fixed expenses:
- Rent or mortgage, home insurance, taxes, and community expenses
- Water, electricity, and telephone bills; among others
- Expenses derived from transportation to the workplace, road tax, etc
- The monthly amount for activities such as gym, dance, and extracurricular activities and classes
- Insurance (life, health, car, and property, etc.)
Group of expenses with the highest amount and recurrence, most people usually have them controlled.
Sudden and Unnecessary Expenses
However, most people often overlook other types of expenses that might not get them to the end of the month with guarantees. These are divided into extraordinary expenses and unnecessary expenses:
Sudden expenses: In this type of expense that affects your finances, you can find many examples. It could be an expense resulting from having a medical condition, to others of an unforeseen nature, such as furniture that needs to be renewed (replacement of refrigerator, washing machine, furniture, etc.) They arise constantly and in many cases at the most inopportune moments. That is why you must try to reduce monthly expenses column to allow yourself to save and have an emergency fund to face the sudden and necessary expenses.
Unnecessary expenses: They are simply expenses that, if you analyze them, you could identify as those that could be eliminated, or reduced. These could be expenses popularly known as ant expenses (daily coffees, and snacks that is consumed) to those related to activities that you do not take advantage of (monthly expenses of applications that we do not use, and expenses in activities that we hardly practice)
The first step to reducing your expenses and saving is to know them. It is strongly recommended that you draw up a monthly budget. Once identified, you must analyze the expense column and try to eliminate or reduce what you can to try to save. This action should not affect your quality of life, except for situations in which they are considered an emergency, and you have no choice, but to reduce it. Maxlend Reviews has more information on this topic that you might find interesting.