‘Spend less than your income’ goes the usual advice from the financial experts. But how do we know which part of the equation is to be blamed, when budget goes off-balance? Often, the focus is on slashing expenses. However, it’s possible that your low income is playing spoilsport.
How do we actually figure it out?
Here are the signs which will let you know if it’s your income to blame. A combination of some of these signs will establish the need to prop up your income levels.
1. You run out of money before the payday
You hit the end of the pay cycle and your bank balance is nil. Pay day is a few days away and you struggle to manage the finances till then. It indicates that you are living paycheque to paycheque. If it happens once in a blue moon, you can ignore it. However, if it’s happening consistently, it is not a good sign and only indicates that you need to bump up your income levels.
Similarly, if you have to often make choices for paying bills (say electricity or rent) it is not a good sign. Both these bills are difficult to do without.
2. Living on bare-bones budget
Living on a bare-bones budget indicates that you have already done away with unnecessary expenses. Your lifestyle expenditure – be it on eat-outs, gym membership and visits to the theatres have already been trimmed to the minimum. Under these circumstances, if you run out of money, it’s a clear sign that you need to earn more.
3. Living on credit
a debt trap. Similarly, if one is engulfed in multiple loans and struggling to pay it up, it’s a sign of trouble.often masks the true financial status. If one is virtually living on to meet his expenses, it is a sign that his financials are in disarray. While give free credit, it needs to be eventually paid up. If one is paying only the minimum dues (5% of total due that is), and rolling over the rest of it, then he or she is heading towards
One needs to park about six months of household expenditure in a liquid fund to take care of emergency situations like that of hospitalisation or a job loss. If you have been unable to build an emergency fund, it indicates that your income needs a lift.
4. You haven’t started investing yet
in equities is considered the best way to build wealth over the long-term. And earlier, one the better it is – as it allows the power of to unfold for you.
You need to save about 20-30 percent of monthly income towards meeting one’s financial goals including that of. If you are struggling to save anything for a long period of time, it’s a sign that you need to enhance your income. It is the same case if you are unable to save for making big purchases – be it for house down payment or buying a car.
5. Don’t have an emergency fund
One needs to park about six months of household expenditure in a liquid fund to take care of emergency situations like that of hospitalisation or a job loss. If you have been unable to build an, it indicates that your income needs a lift.
6. Monthly rent is more than 40 percent of your income
The famous 50-30-20 rule to budgeting emphasises earmarking up to 50 percent of your budget towards meeting your ‘needs’. It includes fixed payment for meeting your essentials like that of groceries, utilities including that of rent.
If rent is already eating up 40 percent of your budget, it’s a sign that you aren’t earning much. This is especially true if you already happen to live in a budget house and in an affordable neighbourhood.
7. Stressed about money
If you are constantly worried about paying bills and having sleepless nights over it, it’s a sign you need to earn more. Too much debt or high living expenses can cause stress. By earning more, you could not only reduce your debt but also bring your budget back in shape.
Combinations of few of the above signs clearly indicate that you need to boost your income and not spend lesser. Find ways to earn more and get your budget back in shape.