If your income doesn't cover your expenses, you must either cut your expenses or increase your income. It's usually easier to cut spending than to increase income. You don't need to make drastic changes, but you must make some effective cuts that will allow you to pay your bills.

First, cover the bills you must pay (mortgage, utilities, loan payments) and money for necessities (food, clothing, insurance). Then, focus on non-essentials - areas where it will be relatively painless to cut back.

Easy ways to cut expenses

The following are some simple ways to cut expenses. They also work if your bottom line is positive.

  • If you visit restaurants and order take-out often, consider "brown bagging" lunch and saving restaurants for special occasions.
  • You can reduce a "fixed" expense such as your electric bill by conserving energy. Make sure all lights are turned off when you leave a room. Switch to small screw-in fluorescent bulbs can also save you money. Their initial cost is higher than regular bulbs, but they last at least five times as long and use only about 40% as much electricity. Each bulb can save you AED 150 or more over the course of its life. If you add up how many bulbs you have in your home, the savings becomes significant.
  • A bagel and coffee on the way to work every morning can cost as much as AED 15 per day. That's more than AED 4000 per year. If you're married and your spouse has the same habit, it's more than AED 8,000 per year. Have breakfast at home.
  • If you smoke, think about giving up smoking. Besides the health benefits, you could save over AED 3,200 per year by quitting a pack-a-day habit.
  • Getting out of debt is tough. It also takes time. Most people need a year or two to escape from debt, but you can do it if you stick with it. Remember, the discipline and techniques you learn by solving your problems will benefit you for the rest of your life. Getting out of debt feels great. Staying out feels even better.

Once your monthly spending is under control, you can think about some ways to make debt a thing of the past. Here's a list of ideas.

  • Each month, try to reduce a different spending category by 5%-10%.
  • Start a savings account for large, infrequent expenses so they won't upset your budget.
  • Charge items only if you can afford to pay for them now - especially large purchases.
  • Use 0%EPP deals allows you to convert your purchase at certain outlets into interest free installment.
  • Treat a credit card balance like you'd treat a bank loan for the same amount.
  • Avoid the "sale" mentality. When you buy a AED 100 item on sale for AED 60, you don't save AED 40. You spend AED 60. It's only a deal if you need it and can afford it.
  • Always track your spending and income to make sure you don't spend into debt again.
  • Try to increase your income. Can you improve your salary? Is a second job possible? Can you sell something you no longer need?
  • Reward yourself. Working your way out of debt is a long, hard task. It's also a big accomplishment. Find inexpensive ways to celebrate your progress.