Managing cash flow isn’t fun, but it’s important. With inflation at an all-time high, raising fears of an oncoming recession, many people are just barely making ends meet, while others are falling deeper into debt. Things are even more expensive when you are in the middle of a legal battle, either in a contract dispute or going through a divorce, for example. Maxing out the credit card or giving up litigation can seem like the only option.
But it doesn’t have to be that way. If you want to stop living paycheck to paycheck, for better or worse, you have two options and only two options.
Both are somewhat obvious and easier said than done: start earning more money and/or stop spending so much money. For most people, it’s much harder to make more money than to decrease expenses. Wages have been stagnant for decades, while housing costs and other expenses continue to balloon.
Credit card debt
It may feel great to eat organic, but if you are just getting by, can you really afford it? I know someone who went $20,000 into credit card debt by eating organic food exclusively, debt be damned.
I enjoy eating organic, but I don’t like paying $10 for eggs. Avoiding overpriced organic food, though, is as easy as changing what time you go shopping. I go shopping at the end of the day when the organic store will put 50% off stickers on a lot of items. Organic products go off really quickly because they don’t have chemicals (preservatives) in them, so stores often need to get rid of many products at the end of the day, leading to big potential savings.
Photo: Food I got for 50% off at the natural food store
But food costs are just one piece of the financial pie. Once you have a financial plan, follow it! Don’t wait until the month is over to start thinking about it. Sitting down with your spouse or partner and formulating a budget is one thing, but you also must enforce and follow it because once you have spent the money, it’s gone.
How you can save money
Let’s say you have two unavoidable payments that you need to make each month, your mortgage and your car payment. Many people, they’ll pay more than the minimum required amount to pay off their car faster. Say the payment is $210 a month, but you might be paying $300 a month to bring down the balance faster and avoid costly interest over the life of the financing deal.
Even paying just a little extra on your car or mortgage is a great option if you can afford it, as long as there are no penalties attached to early repayment.
One of the main reasons why people live month to month, paycheck to paycheck, can be boiled down to one thing: being disorganized. Maybe they don’t check their credit card statements, so they end up getting charged an extra $1000 in fraudulent or incorrect credit card fees.
Or perhaps they miss a payment deadline by a week and end up paying $1500 a year in credit card interest. Or sometimes they might write a check without enough money in the bank, and get hit with a $60 insufficient funds bank charge.
Creating a financial budget
I can’t stress enough how important it is to not only write out a budget but also stick to it closely every month. Doing this will allow you to stay on top of all your expenses each month. Once you’ve learned to live within a set budget, this can make you feel like you got promoted at work with a big raise, all because you’ve alleviated your financial problems with small behavioural changes that will make you conscious about every penny you spend and save.
Putting together a proper financial plan helps you see where your money is actually going. Maybe you are eating out too often. Or maybe you are buying way too much food at the grocery store (and then the food is expiring and being thrown out.) The average household spends just over $400/month on groceries. So if you live in an average-sized household and spend $1000/month, you should ask yourself why (and how?).
Managing cash flow by finding other ways to have fun
Even though everything has opened up post-Covid, I still enjoy finding ways to save money by investing in hobbies instead of costly events and concerts. One thing that is free that brings me a lot of excitement and fun is running a YouTube channel.
I’ve been watching legal videos and documentaries on YouTube for years, and it feels great to put out content and see people respond to it. During the Johnny Depp trial, I was pumping out content almost every day, and it was super fun! And the best part is that it cost me nothing.
Managing cash flow while going through the justice system can be hard, but just do the best you can!