Are you running out of money every month? It can be hard to know why. There are two main reasons people struggle with money: they might not earn enough, or they might spend too much. Let’s figure out which problem you have and how to fix it!
Why It’s Important to Know the Root Cause of Financial Problems
Understanding the root cause of your financial problems is the first step to fixing them. If you don’t know whether your money troubles come from not earning enough or spending too much, you can’t create a plan to improve. Knowing the cause helps you take the right actions, like cutting back on expenses or finding ways to increase your income. This clarity will prevent you from repeating the same mistakes and help you build a more secure financial future.
The Simple Way to Answer the Question
Write Down Your Monthly Income
The first step is to figure out how much money you bring in every month. This includes your paycheck, any side jobs, or other income sources like rental income. Write down the total amount so you know exactly how much you have to work with each month.
List Your Monthly Bills (Needs)
Add up the cost of your rent or mortgage, utilities like electricity, water, and internet, your grocery bills, and any debt payments you have, such as credit cards, loans, or car payments. These are essential expenses—things you can’t avoid paying every month. Without covering these costs, you wouldn’t have a place to live, food to eat, or the services you need to get by. It’s important to make sure you have enough money for these basics before spending on anything else. These are your “must-pay” bills, and they should always come first in your budget.
Here are the most important needs:
- Rent or Mortgage: Your housing costs.
- Utilities: Electricity, water, gas, internet, and phone bills.
- Groceries: Essential food and household items.
- Debt Payments: Credit card bills, loans, car payments, or student loans.
- Transportation: Gas, car maintenance, or public transportation costs.
- Insurance: Health, car, home, or renter’s insurance.
- Healthcare: Doctor visits, prescriptions, or medical expenses.
- Childcare or Education Costs: If applicable, this includes daycare or school fees.
Compare
- If you don’t have enough money to pay for these needs, you have an income problem.
- If you do have enough for your needs but still run out of money after spending on extras like eating out or shopping, you have a spending problem.
Identifying the Problem Is Just the Beginning
Figuring out if you have an income or spending problem is just the beginning. This helps you stop losing money, but it’s not enough to fix everything. Many people don’t like the idea of making extra money because it means working more or finding a second job. But if you want to get ahead, you need to change how you think about money. Fixing the problem is the first step, but you need to work on building more income and making better choices to really get ahead in life. Remember, you can achieve it if you believe it.
