Step 1 – Understanding your Income and Expenses
Before you start investing, you need one crucial thing—money. I know, crazy, right? But you’d be surprised how many people want to make money through investing while having very little to start with. So, the first step is getting into a Net Surplus in your budget so that you actually have money to invest.
What is a Net Surplus Budget?
Net Surplus Budget is when your expenses are lower than your earnings for the month, leaving you with extra money—aka surplus—to invest.
Sounds simple, but in reality, it’s a challenge for most people. A lot of people live paycheck to paycheck, making it hard to build any real wealth over time.
How do you get into a Net Surplus Budget?
There are only two ways of getting a Net Surplus:
- Reduce your Monthly Expenses
- Increase your Monthly Income
Easier said than done, right? Most people don’t live paycheck to paycheck by choice—it’s often their only option. But if you want to be financially free, getting into a net surplus is non-negotiable. Here’s how you can make it happen.
Ways to Reduce Your Monthly Expenses
Step 1: Track Everything
For an entire month, write down every expense—yes, everything. You can use an Excel sheet, an expense tracking app, or even just a notebook. At the end of the month, group everything into categories and see where most of your money is going. People are often shocked when they see the numbers in black and white.
Step 2: Cut Back on the Unnecessary
Now that you know where your money is going, look for areas where you can cut back without feeling it too much.
For example, take a look at your mobile plan. Do you actually use all the data and minutes you’re paying for? If not, switching to a smaller plan could save you money every month—small changes like this add up over time. Do the same for subscriptions, food, entertainment, and going out.
Step 3: Prioritize Paying Off Debt
If you have any debt with interest (like credit card debt or personal loans), paying it off should be a top priority. Interest eats away at your financial growth like nothing else.
Mortgages and house loans are a bit different—they’re long-term, and the interest rates are usually more manageable. But for any high-interest debt, throw as much money at it as possible to get rid of it ASAP.
That’s pretty much it for cutting expenses. You could go even further by cutting out entertainment and eating out completely, but that’s a personal decision. I’m not here to tell you to stop living your life. Just remember—cutting back is temporary and a sacrifice that will pay off in the long run. Whether it’s worth it is up to you.
Increasing Your Monthly Income
Besides cutting expenses, the other way to get into a surplus is to make more money. If you already have a full-time job or business, the best way to boost your income is through side hustles.
I highly recommend reading Side Hustle by Chris Guillebeau—it’s a solid read that guides you through launching a side hustle in just 27 days.
For students, I’ve written a post on how young people can start earning money on the side based on my own experiences. You can check that out here : Side Hustles in Sri Lanka: 10 Ways for Youth to Earn Extra Income .
There’s no single “right way” to increase your income—it depends on your skills, passions, and opportunities. But remember, while our country has its fair share of challenges, you must understand that challenges create opportunities. If you can solve common problems people face every day, you can make money and improve life for others at the same time.
Well that’s it for Step 1! Now, onto the next big thing—Emergency Funds—and why they’re absolute game-changers.