You don't have to sacrifice you life style when you lose your job!
That is a BIG LIE!
You HAVE TO sacrifice your life style unless you have sufficient money to maintain your current life style for another 35 years (assuming you will die at 80).
The True Title of this Post is "Managing Your Expenses - part 2: How to go about it".
Life is a business. You need to manage your CASH FLOW. If you do not know what Cash Flow is, never mind. Simply explained, it is basically how much money comes in and how much money goes out from your pocket and bank accounts. Money comes in is income, money goes out is expense. More money coming in than going out means you have a positive Cash Flow (very good!) If you have less money coming in than going out, it means you have negative Cash Flow (problem!)
If you do not have an income, your pocket and bank account will deplete. You have negative Cash Flow (CF). You must try to reduce the rate of depleting. Since there is no income, the only way to slow down depletion is to reduce expenses.
Here are steps to reduce expenses:
1. List down in detail all the expenses and classify them into things you pay daily, monthly and yearly. You must include all expenses like food (break down into breakfast, lunch, dinner, supper, snacks), transportation (husband, wife, children, public & car loan, gasoline/petrol, taxes, services), phone bill, Internet bill, Credit Card Bills, power, water, gas, home mortgage or rental, TV, subscriptions, childcare, school fees (itemised), money to parent (in detail), donations etc.
2. Sum up all the expenses that you paid daily into monthly figures by estimating how much you would be paying every month.
3. Divide the yearly expenses by 12.
4. Now you have your itemised monthly expenses. You sort them in descending order. That is, the highest goes to the top.
With that you will be able to see clearly what to cut. The rule of thumb is to cut the nice to have items like Cable TV subscription, movie, ice cream, restaraunts, beer (alcohol), holidays, etc. Depending on which country you live in you may sell your car. In some countries, having an old car is better than public transport. If that is a big expense, you get rid of it. You can always buy back a better car when you have better income. Here is what I did. I sold off my condominium that I was paying mortgage (over $2,000 per month). The rental income is less $1,000. So, my CF improved by $1,000. The interest amount was around $1,300 per month. So, this is money losing business, no point keeping anyway. Certainly, I held back buying my digital camera (I drop the old one on the floor and not working anymore.) I may buy back the digital camera if I really need it for my Internet Business.
After going through this exercise, you may be able to cut your expenses by 20-30%. Now, if that is not enough, you may squeeze more out of it. For example, talk to your bank to re-structure your mortgage. Talk to your insurer to change the payment scheme. Cut down the nice-to-have courses for your children or hold back for awhile. Teach your children instead of sending them to tuitors.
Remember: Accept the Reality. But keep your spirit up by having FAITH! (survival skill #1)
Survival Skill Number 4: Managing Your Expenses.
