When Expenses Exceed Income

In our everyday life for a typical citizen of the earth, there will be times when we have more months than the money in our bank’s accounts. Months when unavoidable things will be many that income is surpassed by expenses. All of us have been there even the so-called super-rich. I am very sure even some of the super-rich have experienced the imbalance between expenses and income in their journey to the class of the super-rich. Many times, people just see where the Warren Buffets, The Bill Gates, The Bezos…are in life, we are fascinated by their destination but not the journey.  The glory is in the journey, it is the struggles that many are so oblivious about.

How do you survive when your expenses exceed income? Here I will share specific areas you can hack to ensure at least there is a balance or better still how your income can outweigh your expenses. 

When expenses exceed your income you need to look at three areas;

Start with…

Discretionary expenses

What are discretionary expenses? These are expenses that a household or business can do without, they are not necessary. Discretionary expenses is also referred to as nonessential spending, which means a household or business can maintain itself when discretionary expenses are stopped. Discretionary expenses are the ones you have complete control over. Anything you have complete choice over is a discretionary expense.

Examples of household discretionary expenses are meals at restaurants, entertainment costs, gifts, Vacation and travel expenses, Hobby and sports-related expenses, gym memberships, and so on.

For a business it can be a monthly magazines subscription, daily newspaper …et al here you can use your discretion to know what is not so essential to your business operations. When expenses exceed income cut on the nonessentials.

By cutting on nonessential you will have extra money that you can use to do the things that are essentials. Cutting on nonessentials will drastically reduce your monthly expenses.

The second area you need to address is your variable expenses.

Variable Expenses

This is another area you should look at if your expenses are on the higher side of your income. Variable expenses are the name suggests are expenses that vary from time to time. They are also known as variable costs. Those are costs that are difficult to predicate or pinpoint because they may fluctuate over a week, month or year, it can be challenging to pinpoint what you’ll spend on your variable expenses. They include things like food, car fuel, movie tickets… et al. Something like food, the budget may go higher if you have guests, consumption of fuel in your car will be more depending on the miles you have covered in a particular month, movies tickets may vary depending on time, day, date. Movie tickets may be expensive on weekends because demand is high as opposed to weekdays. When expenses exceed income you reduce variable expenses.

How can reduce variable expenses?

You can opt to subscribe to Netflix instead of going to movies every week, or if it is a must you can check when the tickets are cheaper, you can also decide to go to a movie once every 2 months. 

Food is a bit of a challenge because food is not discretionary, it is not an expense you can do without, but there is something you can do about food to reduce expenses on food. When expenses exceed income in your food budget there are tips you can put into practice to reduce food expenses.

Here Few Tips You Can Try Out:

Buy in bulk

By buying in bulk you save a lot of cash. Failure to buy in bulk is always expensive because the manufacturers spend so much on those small packaging, and that cost is also transferred to buyers. The other thing is that those small packages of food mean you have to buy every month and by so doing you might be paying more if there is an increase in taxation; in bulk, you don’t experience those tax charges every month.  

Go direct to the producers themselves, cut off the middle man.

By cutting the middle man you will pay less and get fresh produce from the source.

Prepare every meal with intention of left-overs; those left-overs can be eaten the next day. You don’t have to cook every day. That saves you time and gas. You can pack them for lunch at work or school. 

Skip drinks when eating outside your house.

Don’t take soda or sugary cocktails…by the way majority of food establishments’ revenue comes from drinks. You see every meal is accompanied by drinks in most cases.

Negotiate when buying, that is doable at your local produce, not in supermarkets.

This is how you negotiate, don’t ask for a lower price on an item what you do is you ask for a higher volume of the same item. Many local vendors will prefer to give you more than bring it back home or waste it. 

Just be creative there are many ways to reduce variable expenses. Read this book by Kaylee Cole, The Art Of Frugal: Feeding Family On A Budget, it will help a great deal.

When expenses exceed income you can find ways to reduce on your fixed expenses.

Fixed expenses

These are the expenses that come in every month and don’t change. They remain constant within your budget. They are also known as a fixed cost. These are expenses include; mortgage or rent payments, utility bills (such as cable, cell, electricity, water, etc), vehicle insurance (if paying monthly), property taxes, gym membership, salaries,  loan payments …and so on. You know exactly when and how much you need to pay, making those expenses predictable. Even though these expenses are constant and predictable they can sometimes change albeit very rare. That means if you change the way you use something like electricity the payment may be lower or higher, your landlord may raise the rent or your cell phone company may raise the price, these things are possible but not frequently.

Since fixed expenses can change that means there is some way you can reduce them. Read this Frugal Living: How To Save Money and Feel Broke by Jammie Walker. It will help big time as it did for me.

Here are some common ways to reduce fixed costs for your business or your household;

• Rent a cheaper house, or go to a cheaper neighbor by so doing you might get a bigger house at a lower price. That is where the Millionaire Next Door lives, they don’t live in expensive suburbs.
• Negotiate your loan interest payment
• Go public colleges their tuition is way lower than private, and they are well trusted by employment agencies.
• Ask your cellphone company to reduce their charges or you will get an alternative. Be polite but firm.
• You reduce the number of employees, or fire them or negotiate their salaries downwards, or hire new employees but at a lower salary.
• Pay off your debt to eliminate paying interest. Paying off your debts is the best investment you can ever make.

If doing those 3 things will be an uphill battle for you, then the only option available which I think is the best route is to find means to increase your income. You can do that by learning a high-paying skill and monetizing it.

There you have it my friends, now you know what to do when expenses exceed income.

To read more articles click here.