Are you tired of the constant struggle and worry surrounding your finances? Maybe it’s time to reassess your finances.

While some couples manage to be on top of their budget and on course with savings plans, others wake up one morning to the realization that the life they’re living is one paycheck away from financial disaster. All is not lost if you find yourself in the latter group.

What to do when your lifestyle needs to change?

Get Concrete Numbers

When you come to terms with the fact that your lifestyle has to change, get concrete numbers. Talking in the abstract about needing to “cut back” is a lot different than knowing exactly what your expenses are and how much money you are currently spending.

Are you reviewing your bank statements? Keeping receipts? Tracking spending on a spreadsheet? Take advantage of technology; there are lots of apps that will help you track where your money is going.

Find the personal finance management system that works best for you, but be thorough! Having a detailed list of bills and creditors along with an accounting of your spending is the best way to get the hard numbers you need to work with.

Eliminating debt, creating an emergency fund and retirement planning are all critical financial issues to be mindful of as well and we’ll discuss them in more detail in another post.

Identify Your Values

As we discussed in our last post, knowing your values makes financial decisions so much simpler. It’s easy to lose sight of what is really important to us (much of which doesn’t require a lot of money) and overspend on unnecessary extras in life. Living life within your values creates the framework by which you begin to make intentional financial decisions. Need help clarifying your values? Receive our free values exercise here.

In his New York Times column, David Brooks says it well: “Early in life you choose your identity by getting things. But later in an affluent life you discover or update your identity by throwing away what is no longer useful, true and beautiful.” The trick is to figure out early on what is “useful, true and beautiful.” This can save you a lot of money.

Consider Cutting Back Big

Big lifestyle changes are hard. Much of the popular advice you hear these days advocates cutting back on purchases like your everyday latte at Starbucks. While it’s true that small changes can make a difference, those results will be more subtle and long-term.

When you are faced with a lifestyle change, you must put all the options on the table. I heard of a husband who realized that selling a beloved truck was the best way to get rid of the student loan debt hanging over his head. Some decisions are painful. Downsizing your housing, looking for another job, moving for a promotion, or cutting your annual vacation; these are all options to consider when making significant changes that are necessary at times like this.

Evaluate Every Option

Look at a list of all of your expenses and evaluate every line item. After evaluating what your money is being spent on specifically, ask why you are choosing to spend money on the items that you are. What are the alternatives? Even when other options seem far outside the realm of possibility, still include them. The purpose of this step is not to solve the problem, but to brainstorm. Considering options that seem far from what you are willing to do (like trading your car for public transportation), can give perspective and bring attention to the luxuries that you have in life.

Below are some examples of line item evaluations:

Car Payment: $400/month

Why do I need to spend money on this? Because I need transportation.

Why am I choosing my current option? Two cars are more convenient for our family and I’ve always wanted a BMW.

What are all the possible options for this expense? Sell it and have one car in the family, sell and buy a nicer car, sell and buy a less expensive car, sell and buy a used car, sell and take public transportation.

How open am I to changing this? (Or do a scale of 1-10 on how important this is). A “5”; even though I love my car, there may be other expenses I consider more important.

If I did make a change, what would be the monthly/yearly cost difference? If I traded for a used Honda Accord, we could have no monthly payments and lower maintenance and repair costs. Possible savings of $7,000/year.

Eating Out: $400/month

Why am I spending money on this? Because we need to eat.

Why am I choosing my current option? Restaurants are convenient.

What are the alternatives? Eating out less, purchasing ready-made meals, personal chef, cooking all meals at home.

How open am I to changing this (or scale of 1-10)? 8; with better planning I could prepare more meals at home.

If I did make a change, what would be the monthly/yearly cost difference? Cutting down to one meal out per week would save our family of four $250/month ($3,000/year).

You can download the expense evaluation worksheet here.

Follow Through on Making Changes

After you’ve worked through your line item evaluations and identified what’s important to you, start making decisions.

As with so much in life, these decisions are not easy or clear cut. Every decision is a trade-off. What is right for one family is not going to be right for the next.

Another important thing to remember is that life goes through phases. Cutting back now doesn’t mean you have to scrimp and pinch forever. If you get your finances under control now, you can look forward to the day when you’ll have more financial freedom.

Don’t forget to reflect back on why you are making these changes. It takes courage to make big decisions when your lifestyle has to change, and remembering the reason you’re cutting back helps keep you focused on what’s important.