You may be earning a decent income but still find yourself struggling financially. Every month you find yourself borrowing, and small emergencies throw you a curve ball. It’s important to note that failure to manage the situation may only worsen the matter. As you get older and have a family, your expenses will increase dramatically.
This will definitely affect your finances, requiring you to look for alternative ways to meet your needs. Finding the real problem and curing it can help you manage your earnings better, thus eliminating the need for borrowing in the middle of the month.
One of the questions that you can start with, is whether you are house poor? You may have decided to buy a house when you were financially secure, only to find that mortgage payments and upkeep leave you with little spending money. Typically finance experts recommend that house repayments should not be more than twenty-five percent at any given time. If they are, you’ll find yourself struggling to meet monthly needs and saving becomes an issue.
One of the options available is to reconsider keeping the house or moving to a cheaper house. It’s a matter of making sacrifices, otherwise the situation may worsen. It is not impossible to buy something that you can afford to pay for, meet all your other obligations comfortably, and save a substantial amount of your salary.
You may have been in too much debt, therefore your debt to income ratio is high. Debt includes all that you owe, whether it’s a car loan, mortgage, or student loan. If you find that a third of your income is going towards debt repayment, there is a danger of defaulting, something that can seriously affect your budget.
You need to bring the situation under control. You could start by cutting expenses or finding ways through which you can increase your earnings. Also you can renegotiate with your lenders to give you a grace period in order to clear short term loans. Although this option may lead to higher interest, it may give you temporary relief as you organise your finances.
With these and more strategies, you can begin to reorganise your finances, thus leading to better spending.