We’ve all been there – staring at the numbers, running the calculations again and again, only to find that our expenses still exceed our income. When your budget stubbornly refuses to balance, it can feel overwhelming and stressful. But don’t worry – there are practical steps you can take to get your finances back on track.
1. Track Every Single Expense
The first step is often the most revealing. For at least one month, track every penny that leaves your wallet, bank account, or credit card. Use budgeting apps, spreadsheets, or even a simple notebook – whatever works for you. But be diligent and brutally honest about where every penny goes.
This exercise usually uncovers “budget leaks” – small, frequent purchases that add up quickly or things we estimate in our budgets that turn out to be inaccurate. That daily coffee shop visit, streaming services you barely use, or little stops at the grocery store might be throwing your budget off balance without you realizing it. And possibly by a lot more than you’d think.
2. Categorize and Prioritize
Once you have a clear picture of your spending, categorize your expenses:
- Essential (needs): Housing, utilities, groceries, transportation, minimum debt payments
- Important (wants): Savings, debt repayment beyond minimums, insurance
- Nice-to-have: Entertainment, dining out, shopping, hobbies
Start by ensuring your essentials are covered first. Then, evaluate which items in the other categories are truly worth their cost in your current financial situation. If you print your bank statement or use a budget tool that will let you color code your transactions, it can be very eye opening to see how many transactions there are in each color or category.
3. Identify Areas to Cut
Look for opportunities to reduce expenses without sacrificing your quality of life too severely:
- Housing: Consider downsizing, getting a roommate, or refinancing if you own. While this may seem drastic, it may be needed to solve long running budgeting issues or overspending.
- Transportation: Carpool, use public transit, join a car share program, or consider if you really need a car.
- Food: Cook more at home, buy in bulk, use store brands, and opt for cheaper but still healthy options.
- Utilities: Implement energy-saving measures and negotiate bills. Calling your internet or cell phone provider and telling them you can’t afford their bill can result in surprising discounts and options you didn’t know where there.
- Subscriptions: Consider going without the entertainment and shopping subscriptions.
Another option is to employ the Step Down Method. This method looks for lower cost alternatives to items we currently spend money on. This could switching to lower cost restaurants or entertainment options, or purchasing items used or borrowing from friends and family. To learn more about this option, read our post on the Step Down Method.
4. Increase Your Income
Sometimes, cutting expenses isn’t enough. Consider these options to boost your income:
- Ask for a raise if you’ve been with your employer for a while
- Take on overtime or extra shifts
- Start a side hustle (freelancing, driving for rideshare apps, selling items online) – be sure to read our post on things to consider when starting a side hustle.
- Sell unused items around your house
- Rent out a spare room if possible
- Look for low cost options to take courses or gain a new skill set – your local library’s website is a surprising resource for this!
- Consider applying for a promotion or looking for a new job if you income is the source of your budgeting difficulties.
Even a small income boost can make a significant difference in balancing your budget.
Remember: It’s a Process
Balancing your budget isn’t always easy, and it may take several attempts to get it right. Be patient with yourself and remember that small, consistent changes lead to big results over time.
If you continue to struggle despite your best efforts, consider consulting with a financial advisor or credit counselor. They can provide personalized advice for your situation and help you develop a sustainable financial plan.
The key to financial health isn’t perfection – it’s persistence. Keep working at it, and you’ll find a budget that balances and supports your goals.