What's your biggest financial worry at the moment? A pile of debt? Lack of investments? Saving for retirement? And how often have you promised yourself you'll do something about it when you have more money?
Blaming your financial problems on a lack of income is dangerous because it pretty much lets you off the hook — for now. If you believe you need more money to fix your problems, you won't bother taking any action to improve your current situation.
But when that pay raise, inheritance or tax refund does come along, what are you going to do? Chances are that increasing your loan repayments won't be at the top of your list. After all, you've been getting by on so little for so long now, don't you deserve a treat?
And therein lies the problem: it's easy to just live according to our means, and so any extra income easily gets absorbed into our daily living expenses. You increase your living standards and that extra money is gone. Or you might have other financial habits that need to be addressed.
So, before you focus on ways to increase your income, you first need to identify the root causes of your money problems and develop better spending habits. Then, when you do get that windfall or pay raise, you'll be much better equipped to put it to good use.
What's really causing your money problems?
There are a lot of reasons why people end up in financial trouble, everything from lazy excuses to tragic stories of misfortune. Here are some of the top reasons that might resonate with you.
1. Lack of priorities
Most of us at some point in our lives have been guilty of this. The reason we don't save more is because we don't make it a priority. Saving doesn't happen by accident. If you just wait to see what is left in your account at the end of the month, chances are there won't be much. It needs to be an intentional decision to set money aside and live off what is left, even if that means delaying other purchases.
2. Not bothering to budget
Budgeting should be a part of everyday life for anyone wanting to get on top of their finances. If you don't know how much is coming in and going out each month, how can you possibly plan ahead? Hint: You many want to closely track your spending on monthly subscription services such as digital streaming, devices and subscription boxes. Chances are, you are spending way more than you think you are.
3. Wasting money
Many of us we are wasting money without even realizing it. Some examples of money-wasters include out-of-network ATM fees, credit card/checking account fees, bottled water, late fees, extended warranties, brand-name groceries, and unused gym memberships. While the amount of wasted money might be small on each individual expense, the cumulative impact can significantly increase your expenses over the course of a month. If you add it up, you’ll likely be surprised at how much you are wasting.
4. It's a good excuse
It might sound strange, but some people get comfortable with not having enough money; it's an easy way out. "Oh, I would join a gym and get into shape but I can't afford it." "You're lucky you can afford to eat healthily." "Sorry I can't help with ..., I don't have enough money."
But somehow, that same person who "can't afford" to eat healthily can still afford to eat out two or three times a week. And since when did you have to pay to go for a run around the park? It's more about avoiding a commitment than anything else.
5. A chronic financial problem
Sadly, for some people, there is a serious underlying financial problem. It could be a gambling addiction, compulsive buying disorder, or simply feeling you have to help others at your own expense. If you're struggling with any of these things, seek help before things get further out of hand.
What you can do even when finances are tight
If you've realized it's time to stop wishing for more money and instead make better use of what you do have, here are some simple steps you can take.
1. Work to a budget
Budgeting doesn't mean having to slave away on spreadsheets for hours on end. Fortunately, there are plenty of great apps and other tools which make it easy to track, plan and manage your finances.
2. Automate your saving and regular expenses
Once you have made a commitment to save a certain amount each month you should treat it like a bill and pay it as soon as you get your paycheck. Set up direct deposits or automatic transfers for all your bills and savings so you don't have to think about them, and once the money is gone you know exactly what you have left for the month.
3. See frugality as a choice, not a necessity
If you're constantly telling yourself or others that you can't afford things, you'll quickly come to resent being frugal. Instead, remind yourself that you are choosing to forego certain things so you can put that money to better use elsewhere. Have a list of cheap or free alternatives up your sleeve so you don't feel like you're constantly denying yourself.
4. Use any extra income wisely
Finally, when you do get that pay raise or a lump sum of income, think carefully about what to do with it. By all means, treat yourself a little. But don’t raise your lifestyle to such an extent that the extra income is totally absorbed by increased expenses. Consider how you can balance your current lifestyle with your future wealth.
Step by step
Money is certainly a very helpful tool when it comes to building wealth, but it's no guarantee. Just like there is a lot more to building a house than owning a pile of bricks. It takes commitment, planning, and a certain amount of self-restraint if you want financial freedom to be a reality for you one day.