You must have realized that no matter how hard u try to save by reducing ‘expenses’ and increasing income, things hardly work out your way. That is very normal,
Whenever income increases, expenses are likely to increase proportionately, that is what we call in economics the marginal propensity to consume (MPC), which basically means increase in personal consumer spending in relation to increase in disposal income, on every one extra shilling earned a particular portion will be spent, most likely higher, than will be saved.
Basically this sublimes into a principle called the Ratchet effect
A tendency for a variable to be influenced by its own largest previous value. For example, consumption from any given income may be higher, the higher the previous peak income. The ratchet effect implies that variables are more sticky in one direction than the other. For example when given a salary increament of kes 10,000.00 your expenses are likely to go up by Kes 8,000.00 leaving only kes 2,000.00 as Saving. Meaning your MPS marginal propensity to save is %change in exp/%chage in income
Expenses reduction techniques that work.
- Learn and shop smart
- Minimize transactional costs
- Utilize bulk discounts
- Budget for your money
All this notwithstanding try to increase your income through doing part time job that pays, start a small scale business, change jobs.
Having enough for yourself and family is not about reducing expenses it about increasing your income.