What to do when your expenses are larger than your income

Rent, utility bills, student loans, food, and even the cost of commuting to and from your job every day is expensive, to say the least. However, when the cost of your regular personal expenses far outweigh how much you make each month, you can quickly find yourself in a hard financial situation.

If your last bank statement made you panic, worry not. We’ll give you the low down on five simple steps you can take to get in control of your finances. When your expenses are greater than your income, using the power of your KOHO prepaid Visa account can go a long way.

Step 1: Figure out the source of the problem

When your monthly expenses are too high for the size of your paycheque, there’s usually a reason. Some things, like an illness forcing you to take time off of work, are certainly out of your control. On the other hand, an overwhelming fondness for shopping through Instagram ads or using emotional spending as an outlet, is well within your ability to change.

Before you can even think about getting in control of your personal expenses, though, you need to know what’s causing your financial stress in the first place. Grab a seat on the couch, make a cup of tea, and have a real heart-to-heart with yourself - and your bank account - to figure out what you can do to get a better handle on your budget management.

To determine what might be at the root of your problems, try the following:

• Before you buy something, ask yourself  if you actually need it (We know this is a cliche but trust us, it works!).

• If not, think about why you’re shopping in the first place. Ask yourself whether you’re spending money just to make yourself feel better or if there’s some other underlying reason.

• Consider starting a journal to note down how you felt before, during, and after each shopping experience. That way, you can reflect back and see if there are any trends in your spending habits that are based on stress or another emotion.

"Grab a seat on the couch, make a cup of tea, and have a real heart-to-heart with yourself - and your bank account - to figure out what you can do to get a better handle on your budget management."

Step 2: Get in control of your budget

Now that you’ve got a handle on why you’re having trouble managing your expenses, it’s time to get to work. All good things start with solid planning and your budget is certainly one of them.

Nobody ever became a money-saving guru by winging it, so getting yourself a budget that can help you stay on top of your spending is key.

Don’t know where to start? Well, luckily for you, we’ve got a sweet budget template that has everything you need to know to get your bank account out of the red.

Plus, your KOHO account comes with a whole host of great budgeting tools, right in the app. You can lounge around in your PJs and see exactly what you’re spending your money on just by signing into the app and checking out your KOHO Insights.

To get started with your budget, follow these five steps:

1. Figure out precisely how much you make each month after taxes based on all of your sources of income.

2. Make a list of all your non-negotiable monthly payments, like your rent, utilities, and food.

3. Review your last month of expenses. Use your KOHO Insights to figure out precisely what you spent money on during the last 30 days and categorize each expense as either essential or nonessential.

4. Create an ideal budget plan that follows the 50/30/20 rule, where 50% of your income is allocated for needs, 30% for wants, and 20% for savings.

5. Compare your previous month’s income to this ideal budget plan and see where you need to cut back on your spending to meet these targets in the upcoming months.

Step 3: Reduce your expenses

You’ve worked hard, put in the hours and you’ve now got a fresh new budget in hand.

Now what?

If you’ve noticed that your new budget still shows you spending more each month than you’re actually bringing home, it’s time to cut down on your expenses. Even if you feel like you’re already quite frugal, the vast majority of us can find a way to reduce the amount that we spend each month.

The first expenses on the chopping block should certainly be your non-essentials, like online shopping, recurring monthly subscriptions (sorry, Netflix), and, yes, probably your daily coffee. As much as we hate to say it, if your expenses outweigh your income, some little luxuries are going to have to fall by the wayside, at least for now.

Does this mean you can’t have fun anymore? Not at all! But, it does mean that it’s time to look for alternate ways to stay entertained that don’t require spending your hard earned money.

Once you’ve pulled the plug on most non-essential spending, it’s time to think a bit about where you can save on your non-negotiable expenses, like your rent and utilities. It may sound extreme, but there are options: Perhaps you can think about getting a roommate or moving into a smaller apartment to save on rent.

Alternatively, it could be time to switch to a more affordable phone plan. (In fact, independent phone provider Public Mobile is one of our Partner PowerUps, meaning you can get cash back when paying via your KOHO prepaid Visa!) These little things might not sound like a lot, but even the small savings you get from reducing your essential expenses can go a long way.

You can then take control of precisely how much you have to spend each month by manually loading your prepaid KOHO Visa card with just enough to cover your essential expenses. That way, you can rein in those impulse purchases without worrying about driving yourself into debt.

"As much as we hate to say it, if your expenses outweigh your income, some little luxuries are going to have to fall by the wayside, at least for now."

Step 4: Try to increase your income

With your expenses at a minimum, your next step is to try to increase your income. The options you have here will really depend on your personal situation. In an ideal world, you’d be in line for a raise at your current job, but if not, finding ways to make money in a side hustle is your next best bet.

Even working a few hours a week at a side job can help you with budget management. Hopefully, this is just a short term measure, but if you’re being crushed by credit card debt, loan repayments, or other monthly expenses that are really eating away at your budget, a little extra income can help you get back on your feet.

Step 5: Save whenever you can

Finally, it’s time to start taking advantage of all the great savings options available to you, thanks to your KOHO account. Even if you’re struggling to balance your spending with your income, the cash back you earn with PowerUps on every purchase you make with your KOHO card can help you build a rainy day fund.

You can also take all the instant savings you get with RoundUps on your purchases and start a savings account to give you a financial buffer in the future. That way, you’re ready to deal with any emergency expenses that come up without veering off course from your budget and driving yourself into debt along the way.

Take back control of your spending

When your expenses exceed your monthly income, it’s normal to feel stressed out and scared. But no matter how stressful it seems, there are actionable steps toward getting back in control. We’re fans of approaching the issue by looking at expenses category by category, and knowing that certain items are more adjustable than others.

And we’re biased — obviously! —  but it’s worth saying again: Taking full advantage of your KOHO prepaid Visa account and its great savings tools can help you manage your expenses. It’ll take some time, but with consistent work, you can get your spending to a more manageable level. You got this!