Bills a nightmare for many

It can happen to anyone. You have a great job, you’re coasting along nicely, and then just when you least expect it, something happens to alter your once-stable financial situation. Maybe it’s illness, a divorce, or even a little fiscal mismanagement on your part. You have a decent salary, but suddenly you can’t pay all your bills.

A lot of people live from pay cheque to pay cheque, regardless of how much they earn. If you are one of those, you don’t have to throw in the towel. In fact, you have options for how to get your finances under control again.

Start by identifying exactly where your cash is going—all of it. This goes beyond just itemising your regular monthly bills. Include those on-the-go coffees and trips to the convenient store, because when you see all of your expenses totalled together, you may be able to pinpoint your spending soft spot. Next, it’s time to start considering the following concepts.

Are You House Poor?

The first step is to identify what you’re spending more on than anything else. Chances are, it’s your overall home expenses.

Consumers often take on more house than they can afford to maintain, and this could be the root cause of your money problems. Maybe it was that extra bedroom you thought you really needed to have, or the expansive backyard that was to die for. Your income might be sufficient to cover the mortgage payment, but is it enough to also accommodate utilities, property taxes, maintenance expenses, and insurance? If not, you might be “house poor.

Do You Have Too Much Debt?

Another common culprit behind financial instability is the overall amount of debt you’re servicing each month. It’s easy to start inching over an acceptable and manageable threshold without even realising it.

Do an easy check on your indebtedness by calculating your debt-to-income ratio (DTI). Begin by totalling all the bills that you pay monthly, including things like insurance, student loans, or credit cards, then divide this number by your gross monthly income—what you earn before taxes are withheld. The resulting number is your DTI.

Most lenders want to see a DTI ratio in the area of 35 percent. While some can be more forgiving, anything over 43 percent is generally considered gulp-worthy. If you find you have too much debt, cutting expenses on things you may not need—like that daily restaurant run—may be key.

Do You Have Spending Issues?

Maybe your DTI is reasonable, but you nonetheless find yourself running out of money before month’s end. Your problem might be that you have spending issues. Maybe you just have a hard time saying no to yourself.

Get into the habit of noting every single dime you spend each day on anything that’s not an essential living expense. Those coffees you’ve been buying on the go are not essential, nor are shopping sprees, happy hours, sporting events, or anything else that just makes you smile.

Some experts recommend keeping an ongoing record in your phone, or even on a piece of paper kept in your purse or pocket. The point is to create a record of everything you spend that you don’t really have to spend, and develop a budget accordingly.

Pay particular attention to your spending habits in the hours and days right after payday. Retailers tend to target these times by creating deals that lure in shoppers, and you might be falling victim. The idea here isn’t necessarily to deprive yourself and make yourself miserable, but rather to not add to your financial stress. You just want to pin down where your money is going so you can take steps to control your spending. Allot a specified number of dollars per month for fun stuff—then discipline yourself to stop there.

Always pay your bills first, even if they aren’t due yet: If your bills are paid right away, you’re less likely to have the money to overspend, which will enable you to get back on your feet financially. One trick is to divide your must-pay bills by the number of pay checks you receive each month. Even if they’re not technically due yet, service them first so you can only spend what’s left over on no necessities.

Consider reaching out to the companies and lenders you owe: Sometimes, asking for help is worth it. Many companies and lenders are willing to work with you while you get on your feet again, particularly during times of national crisis like the coronavirus pandemic, as they’ve implemented special payment flexibilities for those experiencing hardship. – The Balance.