What will you learn?

1.  
   How to Increase Free Cash Flow
2.  
   How to reduce costs
3.  
   What is opportunity cost and how to calculate it

In the previous lesson, we learned how to analyze income and expenses, as well as count the amount of free cash that can be used to achieve financial goals.

Are you satisfied with the current state of affairs? Will you be able to achieve your goals by setting aside the amount of available funds that you currently have?

If the answers to the questions are negative, there is a reason to think about how to optimize your finances, namely to increase free cash flow by reducing expenses or increasing revenues.

You should start with the latter. Can you ask for a promotion at work? Update your resume and go through several interviews. Check the tax office's website to see if you are using all the benefits you are entitled to.

Ways to increase income:

1.  
   ask for a raise;
2.  
   undergo training for a more paid specialty;
3.  
   find a part-time job (use your competencies, look for clients on profi.ru, YouDo);
4.  
   monetize your hobbies;
5.  
   check the possible benefits, allowances and tax deductions that can be obtained;
6.  
   if there is an apartment for delivery, make repairs and rent it more expensively;

1.  
   optimize the storage of funds in accounts: place funds at a higher interest rate, do not keep funds in a current bank account if interest is not accrued on it, get rid of assets that you do not use if the yield on them is lower than inflation;
2.  
   use the maximum of the banks' offers: cards with maximum cashback, a combination of bank cards in case of cashback accrual in different categories.

    

   How to increase free cash flow?

   Increased liabilities

   Increase in assets

   Increased revenues

   Increased costs

    

   How to Spend Less

   If you're not working to increase your income, move on to spending cuts. Start with the largest items of expenditure.

    

   Be critical of expensive purchases, such as an apartment, a car, large household appliances. There is no point in refusing to buy coffee if you overpay hundreds of thousands for a car just because of the reluctance to go to another salon.

   After analyzing large items of expenditure, proceed to the analysis of regular payments and subscriptions. If you watch the series on one platform, then subscribing to a second similar service is most likely not needed.

    

   Manage your subscriptions efficiently and leave only the ones that will definitely be used in the next month.

   Check your bank accounts and cards. If you no longer use some cards, but still pay for maintenance, close the account. Turn off SMS alerts for those cards that you do not use, if this is a paid service. You can also compare the cost of services of mobile operators or find out if your operator has a more favorable tariff.

   At first glance, it may seem that such small expenses as a fee for SMS alerts or an extra 100 rubles for a mobile tariff are not worth the time spent, but this is not entirely true. Over a long period of time, the amount of regularly recurring payments can become quite decent.

   If on some article you are not satisfied with the amount of spending and you feel that you can reduce them, do it taking into account the really possible savings.

    

   The important thing here is to be honest with yourself and not try to cut costs too drastically. Take your time, first cut costs in one of the categories by 5-10% and see if you can stick to this plan.

   In addition, you can allocate expenses for those services or goods that will help you reduce or free up time to perform any duties.

    

   For example, this includes a fee for cleaning, which will free you time to complete an additional project and thereby bring more money than you will give for the service itself.

   How to make money on opportunity costs

   When analyzing your expenses, you can use the concept of opportunity cost. In this case, it consists in comparing the cost of the service that you want to use with the potential earnings that you can get if someone else performs this service for you.

   You can find a personal assistant, for example, from among students: for a small fee, he will perform simple tasks that take you time and effort.

    

   So you will have more resources to develop and perform tasks that already bring you more income or potentially can bring it.

   This is especially relevant if you decide that your professional knowledge can be further monetized by blogging or conducting personal consultations.

    

   It is important that you spend the freed up time with benefit on training, development or additional earnings, and not just on watching a TV series or social networks.

   Also, the cost of one hour of your work can be used to assess the timeliness of any purchase.

   Thus, impulse purchases can be reduced if you understand that the next purchase of branded clothes or a trip to an expensive restaurant will cost you a week of hard work.

   Do not touch those expenses that will affect further capitalization or lead to even greater costs later: the costs of health, education and maintaining good physical condition.

    

   After optimizing finances, recalculate the free cash flow again. Great if it is equal to the monthly deductions for achieving financial goals or more.

   If, even after optimization, you can't get the amount you need, don't despair. Prioritize your goals.

    

   Set aside goals that aren't beneficial or vital to you, such as purchasing luxury goods and other "status" items.

   Briefly about the main thing

   1.  
      To increase the difference between income and expenses, first consider the options for increasing income and only then proceed to reduce expenses.
   2.  
      When cutting costs, start with large purchases.
   3.  
      Prioritize those financial goals that will increase future passive income and quality of life.

       

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