Everyone could use more money in their pocket, but did you know that there are only two ways to get more money?
No matter what your job, spending habits, debt and any other criteria related to your finances, if you want to make more money then there are only two options open to you.
You can either increase your income or reduce your expenses. Its as simple as that.
Here are two ways to get more money and how you can go about each.
two ways to get more money
No matter your money goals or the reason for wanting more money, increasing your cash flow involves increasing incoming money, reducing outgoing money, or some combination of the two.
To help illustrate this point, let’s look at a concept you may be more familiar with: losing weight.
It’s the same idea. To lose weight, you must either burn more calories (through exercise or activity) or reduce calories consumed (eat less and healthier). Similar to losing weight, the most effective way to save money can be to increase your income and reduce your expenses.
Why are we telling you this?
Because losing weight is a lot like losing weight, people tend to focus on only one option when it comes to increasing cash flow. When trying to lose weight, people focus on exercise and ignore the effects of diet. With money, people focus on increasing income and fail to recognize that they can increase their cash flow by limiting their spending.
Increasing your income is always an option and will allow you to make more money without altering your current spending habits. You can increase your income through side hustle, investments, passive income streams, money making apps and actions to get quick cash.
But for those who already work a lot, can’t get a second job (or more hours than before), or simply don’t want to work more, there is another option.
Reduce your expenses.
Decrease your spending, and increase your money.
We’ve already written several articles on how to save big money on interest (see our Taking Interest series), but the purpose of this article is to guide you through a process to determine which money-saving option is the best. good you.
First, you need to create a budget.
We know, budgets are not a lot of fun, and you might not know how to budget. Well, you’re in luck, because here’s a quick step-by-step guide to creating a basic budget and what to do based on the results.
Calculate all your fixed expenses. These are things like rent/mortgage, car insurance, utilities, loan payments and whatever else you have to pay every month. These are set payouts that are relatively predictable. Some of these things are necessities for a living, while others are a result of the choices you make (think car payments: a basic commuter versus an expensive sports car!) No matter what category your fixed expenses fall into (necessities). or alternatives), these are things that must be paid every month and take priority over all other expenses. You should also include some money in your fixed expenses every month to make up for unexpected expenses. These are things like broken equipment, car repairs, and similar Murphy’s Law issues that must be addressed. Compare your total fixed expenses to your income. What is the difference? Is it a positive number or negative? Hopefully, it’s positive (meaning you have money left over after fixed expenses), but if it’s negative, you’ll need to make some big changes ASAP. If the difference is negative, you are running out of money before all your bills are paid and there is a serious problem. You have to either increase your income (through another job or other means) or reduce your fixed expenses. You can move to a cheaper location, sell your car (or other items you bought using a loan), or ask for help. If you are in this situation, stop here and look at the options listed to get yourself back on track. Don’t dig a deep hole by supplementing your income with credit cards or payday loans! If the difference is positive, you are in a good place. This means you can pay all your necessary bills and expenses, and have money left over that can be put to other uses. Read on for the next steps! Calculate your variable expenses. If your fixed expenses are positive compared to your income, you can begin to see variable expenses. These are things you don’t necessarily have to buy and can vary greatly from month to month. First in this category are things like groceries and gas, which are similar to fixed expenses except that these items can be adjusted through frugal options. However, the most influential are variable expense categories such as eating out, clothing, personal grooming (nails, Starbucks, massages, etc.), and entertainment. This is the number one place where people blow their budget. While these things may give us short-term satisfaction, they don’t have to be lived for and are prime places to start saving money. Decide which variable expenses you want to eliminate or reduce. This is the place where you can save money and earn big. Usually, people who have extra money after fixed expenses spend most of it on fun things. They get a Starbucks every day (at $4 a pop!), eat too much, or use their surplus to buy more expensive items and increase their debt. That’s all well and good, but looking for ways to reduce your variable expenses is a good way to go if you want to increase your cash flow. Budget your variable expenses based on your goals. how much money do you need We recommend setting that amount aside and budgeting your variable expenses to allow for the loss of that portion. For example, let’s say you want to contribute $100 a month to a retirement account, and you currently spend $100 each month on food and entertainment. Instead of setting your dining out and entertainment budget at $50 a month, you save the $100 needed to reach your goal. final thoughts
No matter what you decide, remember that it boils down to two ways to get more money: by increasing your income or decreasing your expenses. Creating a basic budget is the tool you need to see where your money is currently going and make an informed decision about which option works best for you.