If you’ve suddenly experienced majorly increased living expenses or are preparing to take on more expenses in the coming months, there are a few steps that can help make the transition less stressful and more manageable. Just one month ago, I bought my very first home. In an extremely fast purchase, just 30 days from start to finish, we took possession earlier than anticipated. Although we knew that our expenses would be increased due to the dramatic change, we weren’t sure by just how much.
As exciting as the transition has been, the financial side of owning your own place isn’t always as much of a thrill. In fact, once I put together my new monthly budget, our wallet was much less thrilled than we were about the change. Our living expenses had officially increased by 75%. What does this mean for us? We had to seriously adjust parts of our spending to incur these extra costs and make the move less overwhelming than it sounds.
Here’s how to adjust to increased living expenses:
Step 1 – Find the reason for an increase.
The first thing you should do is look into why this increase is occurring. For me, it was obvious that the expenses would come from our new home purchase, but that might not be the case for you. Suddenly, we had home insurance, waste recycling, water and property taxes to account for – which all play a part in a homeowners monthly budget.
In your situation, was the decision for your expenses optional? In other words, did you move to a city with a higher cost of living for a new job, or did your landlord raise your rent with just one month’s notice? If you were aware of the increase, now is the time to consider the affordability and whether or not this change stays in line with your budget. This might mean finding a way to step back and reassess whether you can truly afford the change.
Step 2 – Adjust your budget or create a new one
If these new expenses are significant enough, you will need to update your budget. If you don’t have a budget, now might be the time to work one in. Perhaps you want a cash-based budget that restricts overspending until you learn to manage the change in expenses. Give yourself a trial period of decreased variable expenses and learn to live on what you earn. Sometimes it’s an emotional attachment, such as not wanting to miss out on something that can end up being costly, that is affecting your ability to take a good hard look at your financial situation. If this is the case, take time to rank your expenses from most to least important, and ensure you are prioritizing the right bills.
Step 3 – Learn how to forecast upcoming expenses
While we’re on the conversation of budgeting, now is the time to consider any expenses you wouldn’t typically work into your excel spreadsheet. I’m talking about everything. What do you spend money on weekly, monthly, quarterly, and annually? Whether it’s Christmas, birthday gifts or a trip to Cabo every February, all of these costs need to be included. Once you have an idea of the cost, add up the total of these irregular expenses and divide that number by 12. You can now put aside that much money in your monthly budget. By forecasting upcoming expenses that you wouldn’t typically account for, you can avoid any further increase while you settle into your new lifestyle.
Step 4 – Find ways to temporarily help you adjust.
While you get used to this change in expenses, it’s a good idea to look at ways to make the change less overwhelming until you are comfortable with new spending habits. As difficult as it may be, it might be a good time to try something new, like taking on a part-time job, selling old furniture, or sitting down with a credit counselor who can help you look for other ways to downsize. This additional income can help with your new lifestyle inflation and also provide a healthy cushion for any unexpected financial emergencies. For me, spending evenings and weekends as a freelance writer has seriously helped to increase my income, but also helped prioritize my time so that I’m less likely to be out spending money.
Another change that might not be fun, but that will be valuable, is to nix some of your typical non-essential budget line items as you get a grip on what’s a reasonable amount to be spending on entertainment each month. This will also ensure the main source of increased expenses isn’t due to an attempt to Keep Up With the Joneses — or the Kardashians.
Step 5 – Act like a CEO.
The last step that was crucial to facing our increase in expenses was learning how to treat my income as though I owned my own business. If your company has more going out than coming in, it’s time to do an audit. This helped us become cut and dry with certain aspects of spending that didn’t benefit our lifestyle and that weren’t adding value to what our goal is — which would be to manage an increase in living expenses. We had no problems closing down some online accounts that weren’t costly individually, but rang in at around $150 per month altogether. If what we spent didn’t give back what we put into it, the item was removed from our budget line — simple as that.
Most importantly: constantly pay attention to where your money is going.
Anytime you find yourself in a tough financial situation, it’s a good idea to do a lot of personal reflection and research. Which of your spending behaviors have recently changed? It’s normal to go through periods of increased living expenses because the reality is that nothing in life comes free. If you ever feel overwhelmed, it’s okay to cut back and live life a little more frugally until you find a way to balance your spending with your overall financial goals. Give yourself time to get your budget back to its happy place.
Alyssa Fischer claims she’s not an expert on personal finance — which is why it’s easy for her to explain financial topics without getting too intense. You can find her on her blog, Mixed Up Money, where she proves money isn’t boring (and that it’s also a little funny). You can also spend all day ranting with her about your finances on Twitter.
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