It can be difficult to afford everything that we need at times and when we have a family there are more to buy for and therefore it can be even more difficult. It is common for families to get loans to buy some things that they need because they cannot afford them otherwise. For large items such as houses or cars this is not surprising and it is often difficult for even the most affluent family to afford these without borrowing money. However, something it is the little things that get too expensive, even perhaps managing basic bills and food and this is when action needs to be taken as if you have to borrow every month then you will end up struggling to repay what you owe. In this situation you may need to take drastic action to make sure that you are managing.
- Cut down all spending to essentials – it can be wise to start by cutting spending right down so that you are only buying essential items. This means paying your bills and buying food and other things that you cannot do without but cutting back on everything that you do not need. It is worth questioning everything that you buy and thinking about whether it is necessary. Although this is a very extreme thing to do, it is only a first step. Once you have cut back, you may then find that there is some money available to start spending in some areas again. You will just have to decide where is most important and prioritise that spending better. Budgeting can be hard, but it will mean that you will be able to manage your spending without the risk of going into unplanned debt.
- Compare all prices – it is good to compare the prices of everything you buy and see whether you are getting good value for money. There may be some things that we are prepared to spend more money on because we feel it is worth it because the quality is better, perhaps because we get a better service, it lasts longer, does its job better or tastes better. Cheap is not always best but there are probably items that we are paying more for than necessary and it is worth checking. Remember to check those things you pay for by direct debit such as utilities, insurance and financial products as well as the items that you buy in person at the shops or online.
- Pay off any outstanding loans – it might sound odd that you should be considering paying out more money when you are trying to find more, but it does work. If you have an overdraft, for example, you will be paying interest and possibly a charge for it every month. If you can get it repaid, then you will no longer have to pay this fee so it is worth it. The same goes for other short-term loans like those offered by Cobra or credit cards where the interest rates could be very high. Just paying off a small amount each month will reduce the interest you are charged and as you whittle down what you owe you will be paying less and less interest and so will be able to afford to repay more and more. So, although it might seem to take ages to reduce the balance by much to start with, as you go on it will accelerate down.
- Try to save a bit each month – Once you have repaid the loans you will be in the position where you can save a little each month using that money that you were using to repay the loan. This will allow you to have a reserve of money and so if you find that you are struggling or need to buy something big, you will have money there to fall back on. Do pay off loans first though as in most cases savings account interest is very much lower than interest that you are paying on your borrowing.
- Sell things – if you want a lump sum of money then selling things could be a good way to go about it. If you have items that you no longer need then selling them could raise some money. Although you will only get this money once, unlike income, it will still be helpful to make large purchases or to pay off debts. Selling things like clothes you no longer wear, household items you no longer use and things like this may not raise a fortune, but it can all help. You may also have some things that are of high value which could really help you out.
- Earn extra money – It might be possible for you to make some extra money that could help out. You may already feel that you are working so many hours that you cannot manage any more but if you are not, then taking on more work could be a good option for you. Perhaps swapping to a better paid job or trying to get a pay rise will also be possible options. However, for most people these will not be options and they will need to think of alternatives. It might be possible to do some work from home, perhaps online which could earn a bit more. Or perhaps to rent out a room of the house or the driveway to make some.
We probably all would like to have a bit more money to spend but will find that household expenses can be expensive and mean that we do not have a lot of free money. This is something that we might be able to do something about. It could be that we are paying more than necessary and there are things that we can cut down on. There are methods that we can use to check this.
- Compare prices – it is a really good idea to start comparing prices on everything that you buy. Many may limit this to when they shop for things at the supermarket but it can be expanded to most things. For example, if you have a mortgage or loans then you might be able to find cheaper lenders. You may be able to find cheaper insurers, utility suppliers and things like this as well. It is well worth going through everything that you pay for as a household and seeing whether you can get them cheaper. You might be able to use comparison websites for some items, but you could also talk to other people and see what they buy and can recommend and compare retailers yourself as well. Even if you can only save a little bit per each item it will add up and you could end up making significant savings.
- Is everything necessary? – it can also be wise to ask yourself whether it is necessary to buy everything that you get. It could be that you hardly use certain things or that you can do without them. Perhaps you will be able to cancel a subscription to a TV channel and manage without it or stop taking a magazine or newspaper if you are able to catch up with the news online or on the television instead. When you buy anything just ask yourself whether you really need it and that should help to make sure that you are not buying things that are not necessary. This can feel hard as you may feel that you will be depriving yourself of things that you like if you do not buy everything that you need. However, if you really want to cut down your expenses then you will need to buy less things as well as paying less for those that you do buy. It can be easier than you think if you are cutting down on things that you will not miss that much. If you are finding it tricky though, try to focus on why you are doing it and the benefits of that so that you can work towards that rather than concentrating on the sacrifices that you are making.
- Consider downsizing – a big way to save money could be to downsize. If you move to a smaller home then it is likely your rent or mortgage will go down and your insurance and council tax. It will cost less to heat and maintain and there will be less to clean so you will not have to buy cleaning products so often. It will also be cheaper to furnish and decorate. This is a huge step though and for some people it will not be possible as they may not be able to fit in a smaller place as they may be in the smallest they can manage in anyway. However, do think about it seriously as you could potentially make a huge difference to your finances by doing this.
- Try to use less – using less of everything that you buy will help you to save money as you will not need to buy it as often. This can apply to a lot more things than you might think. For example, it can apply to using less water, electricity, food, water and making less insurance claims. Also using your car less will help to save fuel, wear and tear on the tyres and general wear and tear on the car. It can be easier to cut down on some things than others and so it is a good idea to think about what you think what might be the easiest for you to cut down on. Also look at the costs of these things and think about what changes you could make that would make the most difference. If you walked or cycled each day rather than driving, that could make a big difference but if you ate half a chocolate bar each day instead of a whole one that would make less of a difference (although it could have a good impact on your health!).
These can seem severe but if you do a little bit of each, then those changes could add up to make a big difference to your finances. You will find that as you try different things, some will be easier than others and you could concentrate on the easier ones so that you still spend less but do not feel so deprived.