Our current financial times can be a bit scary. Bank failures, interest rate increases, layoffs, companies going under, and the craziness of government all create an environment where our financial futures seem uncertain. Combine that with increases in prices at the pump and the grocery store…it can leave you pretty worried.
In times like these, we often hear the advice to look at our budget and reduce expenses. Sounds simple enough. Just look at what you spend and cut some. But the reality of making or reducing a budget can be very intimidating to most people. What are the right choices? What should I be spending money on?
Don’t worry. We’re here to help. Take a look at these three questions to help with your budget.
What Are You Spending?
This is the easiest place to start. What money you make compared to what money you spend is the foundation for any budget.
The math is pretty simple for this one. First, what are you bringing in? How much money do you make in a given month? It could be from your job, a side hustle, maybe some rent, or any other source. Got that number? Good.
Now just look at how much you spend in a month. What goes out? Don’t worry about what the money is spent on. That doesn’t matter for this first step. Just figure out the money that goes out and write that down. Got it? Awesome! Now we just do this equation below.
Income – Output = Surplus/Deficit
Pretty easy, right?
Your goal in lean times should be to have a positive number (surplus) at the end of that equation. That means you make more than you spend and are living within your means. If you have a negative number (deficit) then you have some work to do and it’s time to move on to the next question…
Why Are You Spending It?
Take a look at your expenses. Just take a moment and go down the list. You’re probably spending on some pretty familiar things. Gas, food, clothes, home repairs, insurance, and maybe even some fun expenses are probably all there. No, we’re not trying to shame you for how you spend your money.
But tough times are when we need to look at why we are spending money.
Some expenses are essential. Take gas for example. You probably have to drive to work. You need to take your kids to school. There are errands to run. Gas for your car is an essential expense. Food is another one that we need. While you might be able to reduce these expenses, they never really go away.
Other expenses aren’t essential. If you go to the movies a couple of times a month, it’s not a requirement for your life. Oh, it’s fun, and we need fun. But if you need to cut something from your budget…going to the movies might be a decent place to start. Dining out, video games, streaming services, and many other discretionary expenses are those things we can easily cut when the time comes to reduce our budget. These are the first places we should look actually.
Finally, we have what we like to call the “gray area” expenses. These are those expenses that seem harder to define. Insurance is a great example of this. When times are lean we tend to look at things like insurance and wonder if we need them. This makes sense in a way because the money you pay for insurance doesn’t immediately give you anything. It doesn’t put food on the table or gas in the car.
But insurance does mitigate more expensive problems. That monthly premium may feel like a lot at $70, for example, but a car wreck can cost thousands. Homeowners insurance seems like a lot, but we live in an area where storm damage is common and those repairs run $10,000 or more. So those expenses are protecting us. When you stop and think about it, the protection of insurance seems a bit more essential now doesn’t it?
So you know what you’re spending and why you’re spending it, but have you remembered the important things?
What Are Your Goals?
Most of the time we focus on what we spend and how we can cut our expenses. It makes sense. When times are tough, you make your spending lean and get through. This is a great tactic for survival and is central to most survival thinking. Seems like just what we need when financial times are tight.
But there’s a problem with this thinking.
When we focus solely on survival, we often lose sight of the future we want to reach. Our goals become secondary and we move forward just trying to get through the day-to-day. For a while we do. Our expenses are cut and it seems like we have some room to breathe. However, when we forget about our future goals and don’t make those part of our planning, we end up going far away from the path that will get us there.
When it comes to your budget it’s important to keep your goals in mind. Saving for retirement or home is important. Protecting your home is important. Insuring your company vehicles are protected is important. Whether it’s founding your dream business, growing your current business, buying a house, sending your kids to school, or just taking a dream vacation, remember to include those items as part of your budget. Just because times are tough doesn’t mean you have to cut your dreams.
Supporting You in Good Times and Bad
Dealing with tough economic times is trying. Creating a budget, understanding your expenses, and making tough calls can be difficult for most people. Fortunately, you don’t have to do it alone. Our team at Help2Cover is here to help answer your questions and help you navigate the world of insurance. If you have insurance questions or needs, contact us today! We’re ready to help!
At Help2Cover (H2C), we understand that insurance goes hand in hand with solid financial planning. H2C Insurance Agency was founded by a group of professional insurance and financial planning experts. With years of experience in the industry, we have a deep understanding of the importance of comprehensive coverage and strategic financial guidance. We go beyond traditional insurance services. We strive to provide holistic solutions that integrate insurance protection seamlessly into your broader financial goals. Whether you’re seeking personal insurance coverage or business insurance solutions, our dedicated team is here to tailor a plan that aligns with your unique needs.