Two levers you can pull to change your situation
People often talk about all the things they have done to improve their budget. They have cut out their subscriptions and reviewed their insurance premiums. They have called their internet and mobile phone providers for a better deal. They have switched from shopping at major supermarket chains to their local, more budget-friendly grocer. They buy second-hand and cut their children’s hair at home.
Don’t get me wrong. Doing any or all of these things is fine. It’s a great first step to understanding where your money is going and where you can cut back on expenses.
Collectively though, cutting back on these smaller items will not substantially move the needle. It might free up several hundred dollars per year to put back into your budget - which is good - but if you need several hundred dollars per week or per month, it simply won’t do the trick.
If you are drowning in debt or the high cost of living is pushing you further and further away from your goals, you need to pull one of these two levers:
1. Increase your income
2. Decrease your expenses
These two levers are the only way you will break free from the cycle of living paycheck to paycheck. Drastic measures for drastic changes and all that.
But before you do anything, you must have a written budget. You must have all of your expenses including bills and debt payments, written down.
Once you know where you are, you can figure out where you’re going.
Your current situation will determine what is possible for you. Do you have the option of increasing your hours at work or asking a family member to help with childcare one day per week? Do you have the option to move in with family for a short period of time while you get back on your feet? Can you sell some big ticket items to help snowball your debt? Can you do food delivery or night-fill work a few nights per week?
When I was in tens of thousands dollars of debt, I picked up a second job working at a pizza place. For three nights a week I would clock off my regular full-time job at 4pm and start my casual job at 5pm. I would be out of the house at 6am and not get back home until 10pm. I did that consistently for 18 months. I’ll be honest, it was a miserable time. Yet I am grateful to have had that experience and to have taken accountability for my behaviour which got me in debt in the first place. It was a time of learning and growing for me; real behaviour change happened from that point on.
Increasing your income by $100 per week will give you an extra $5,200 per year. If you can increase your income by $200 per week, you will have an extra $10,400 per year. That is one massive snowball you can throw at your debt.
Similarly, decreasing your expenses by $100 or $200 per week will provide you with the same result – between $5,200 and $10,400 per year.
But cancelling your Netflix subscription alone will not get you there.
You need to be honest with yourself. What are you willing to do to move the needle? Think about where you will be in five years from now if you start today.
Pull a lever and change your life.