And we are back to the series! Welcome to the second entry on the “How to Manage” series. Last week we explored some of the most important factors to consider when creating a budget. You can read that post here. Today we will be exploring the cost debt and how your expenses can undermine your growth.
I learned the cost of money when I moved to the United States. Back in Colombia, I was not responsible for paying for anything and my mother usually took care of my schooling, food, housing, utilities. I didn’t have to worry about anything. It wasn’t until I left my home that I began to learn how much things cost. The cost of insurance, the cost of gas, the cost of food, and the cost of going out were some of the first costs I encountered.
Today I want to share with you the strategies I use to manage my expenses to stretch out how far my money goes in the most effective way:
1) Make A Payment Schedule
Please let me know if this is you. It’s the first week of the month and you’re going about your business. Not a worry in the world and suddenly you remember, “oh no! Rent was due 5 days ago!” I’ve been there and it’s very common, don’t worry. The best way to combat this is to take the time to write every charge you have and the date when it is due. Take the time to write this down and take a picture to save it in your phone. And if you want to go the extra mile, add these dates to your calendar with reminders so you never miss a date anymore.
2) Always Look for Alternatives
There’s this concept called “switching costs” and it basically means any impediment to change suppliers. It could be an extra-long cancellation process, the cost of breaking a contract, or the simple hassle of starting a new relationship with a new company. I tell you right now, be willing to switch when you find a better offer. And you find the best offer by looking. Sometimes they will come in an ad or through a friend, but most of the times you have to go out and look for them. When a company increases a price on you, make sure to call them. Ask them if they can do better and if they can’t, start looking at what the other companies are doing. If you can get a comparable service for less, you should consider switching.
3) Set Up A Trend
When it comes to variable costs like utilities and sometimes insurance, I’ve found that the best way to tackle these costs is to set up a trend. In your payment schedule you start noting the actual cost per month. For example, let’s say you spend on average $100 a month on your electric bill. One month you notice a spike to $150, and you quickly point out where the increase comes from and compare to previous months. If you don’t know what your trend is, you wouldn’t be able to do this because you simply don’t know what your numbers are.
Keep these quick tips in mind when looking at your expenses and you will be able to find ways to extend your income. To recap, create a plan to know when everything is due, keep an open mind to switching to comparable services, and record your past payments. Please let me know if you have any questions and have a blessed day!