Is It a Cash Flow or Spending Issue?
One of the main issues in eliminating debt is failing to identify what the issue is. Most people find that there is, in fact, an issue. But, they are unsure how to go about fixing it. At the end of the month, you find there is simply no money. It is important to step back and see how you arrived at the end point. Typically, if not all the time, there are two macro problems. The first issue could be a cash flow problem, with the second being a spending problem.
A cash flow problem is simple in nature. It is when your cash inflows are similar to your cash outflows. For example, if you earn $100 a month and you find your debts and expenses total $90 a month, this is a cash flow problem. Certainly, you can try to get out of debt with the $10 wiggle room, but it will take some time.
If you find yourself in a cash flow problem, the priority is to increase incoming cash. You can increase cash flow by getting a second job, finding products to sell online, garage sales and flipping items, or try cutting back all unnecessary expenses. Even if you have a full-time job, it is easy to increase your income. Check out my post on 3 ways to increase your income while having a full-time job.
If you find that the cash flow half is not your issue, then you likely have a spending problem This is self-explanatory but I’ll give an example. Say your income is $100 a month and expenses/debt are $40, this gives you $60 of free cash flow. However, if you are spending outside of normal expenses and debts, you will find that $60 dwindles quickly.
Have no fear! The solution to this is to begin budgeting. Whether it be using an excel spreadsheet or a bullet journal, you need to give your money direction and purpose. Now, I’m not saying stop eating out or spending, but if you are serious about becoming financially free, take that budget and give yourself a hard limit on how much you spend next time you go out.
Getting out of debt and controlling your spending is simple. But, it takes time and willpower. First, you need to identify the issue. In my case, for example, I have a cash flow issue. At the end of the month, after all debts and expenses are covered, I have just over 7% free cash flow. That used to be larger but a client I was writing for discontinued my services after a year. So for me, I have to increase cash flow and really trim the budget.
Secondly, you need to have a game plan for the future. Stick to it and complete it with purpose. Lastly, maintain the motivation and know that the end goal is worth it.