Living from paycheck to paycheck? Here are six simple ways you can improve your finances

Setting up an emergency fund is a great way of saving for the future. But you can’t contribute to this fund if you exhaust all your income every month

How to improve finances

File photo  |  Photo Credit: BCCL

When it comes to the end of the month, do you often find yourself strapped for cash? Does it seem like no matter how hard you try and plan your budget, your expenses keep shooting over the limit, at times to an extent that struggle even with your essential spends? If this is how you feel, you’re not alone. There are many young working people who face the same problem.
Here are a few tips on how you can improve your finances if you live from paycheck to paycheck.

1) Imagine you’re earning less than you actually are

You spend keeping in mind an idea of how much you earn each month. For example, let’s say you earn Rs.30,000 a month. You spend based on this. At first, it seems as though you have a lot of money to spend at the beginning of the month. You might spend a bit recklessly, buying expensive food, clothes, and what not. Soon enough, you’re running on fumes by the 25th.

Now, if you were earning only Rs.20,000 a month, you would limit your spending to that amount, right?. What if you assumed you’re earning only Rs.20,000 when you’re actually earning Rs.30,000? You would save Rs.10,000! This simple trick can help you save a lot of money every month and filling the gap for a few days until you receive your next salary.

2) Set a budget and track your spending 

If assuming a lower income doesn’t seem like something you can do, look at setting a realistic budget. To do this, you need to know where your money is going. So, jot down all your possible expense heads. Next, write down amounts for each of these expenses. For example, food is a major expense. Let’s say you set aside Rs.12,000 a month for this. Now divide that by the number of days in the month (let’s assume its 30). You get Rs.400. That’s how much you can spend at the most per day on food. Next, note down every purchase you make. You can use Google Docs or Microsoft Excel to keep a record of your expenses. There are also various mobile apps that can help you in this regard.

3) Cut down your spending 

Here’s where we talk about a need versus a want. If you’re on a tight budget, focus only on what you absolutely need and spend only on them. Reduce wasteful spending. Yes, sometimes you may have the craving to have expensive food, buy costly clothes, etc. We’re not telling you that you shouldn’t indulge in a bit of luxury at all. You can, once you have a bit of saving. Till then, keep your focus on what really matters. A few weeks or months of careful spending can help you build up enough savings to enjoy the finer things in life.

4) Automate your savings

Setting up an emergency fund is a great way of saving for the future. But you can’t contribute to this fund if you exhaust all your income every month. One way of making sure that you start saving is to automate them. Give a standing instruction to your bank to automatically transfer a portion of your monthly income to another account at the beginning of the month. You could set up a recurring deposit account as well. This way you’ll also grow your savings fund with the help of the interest you earn.

5) Downsize if you must  

If you’re finding it really difficult to make ends meet, you might want to consider making some lifestyle changes. Housing, for example, is one of the largest expenses in India, especially in metro cities. Many people spend at least 25% of their income on rent. If you’re in the same bracket, you can try moving into a smaller house with lower rent or taking up a house in a cheaper locality. You can also consider getting a flatmate to split your rent. Of course, it all depends on which option is more feasible for you.

If you’re someone who takes a cab at the drop of a hat, you may save a lot of money if you start using public transport (or at least cab sharing) for your daily commutes. Also, cooking at home is much cheaper and healthier than eating out on a daily basis. Making other such small lifestyle changes can help you save money.

6) Try and increase your income 

If savings are not enough to bail you out completely from financial stress, you can also look for ways to increase your income. Side gigs over the weekends based on your skills and hobbies will not just expand your financial pool, but will also leave you with lesser time to blow all your money up! Online tutoring, wedding photography, freelancing, becoming a tour guide or even a karaoke jockey on weekends are only some options. You can also go for a meaningful and cost-effective upskilling programme or certification to land up a promotion or get a better-paying job.

These are just a few tips. But I’m sure if you closely track every rupee that leaves your account, you’ll find a number of ways to cut down. For example, avoiding friends who always insist on parties, getting rid of cable subscription if you’re glued to internet content – the possibilities are endless.

All said and done, you’re looking to make a better future for yourself. And when you need money to make that happen, it’s best that you start right away. Like the old saying, “little drops of water a mighty ocean make”, a small start can help you save enough to have a comfortable future.