Personal finance can seem like too complicated task. But, knowing how to manage your money is a must (if you want to avoid much larger stress). Luckily, there are strategies and ways to organize your funds and make sure you have enough for everything. So, here are a few tips that might help you get started, help you better understand your finances and even help you save a few dollars.
The 50/30/20 Rule: A Simple Budgeting Framework
This rule is a simple framework that helps you organize your income and expenses. It consists of using percentages to allocate your money into three categories: needs, 50%; desires/wants, 30%; and savings debt repayment, 20%.
Why do people love this rule? Well, simply because it’s straightforward. You can even use the 50/30/20 calculator to know exactly how much money you need to leave in each category.
Apply “Pay Yourself First”
With this strategy, you put saving money above bills and expenses. Set aside a portion of your income from your paycheck for savings or investments the very moment you get it before spending on anything. This way, saving for the future becomes a non-negotiable part of your financial habits. Savings as a top priority will keep you more in tune with long-term financial goals, whether retirement or buying a house.
Try Cash for Discretionary Expenses
Another way to have better control over your finances is to watch out for unnecessary costs. These can include anything from paying for dinners to impulse buys of unnecessary items while shopping. And there is no better way to keep track of unnecessary expenses is by paying in cash. The more money goes through your hands, the more aware you will become of how much you are actually spending.
This works well because of the real connection this gives between your spending and your available money. It helps you stay accountable to your budget and will make tracking how much you’re spending in each category easier. You’ll also be less apt to make unnecessary purchases when your cash reserves are shrinking.
Set Up Separate Accounts for Different Goals
Different accounts will make it more manageable when looking at various financial goals. You can set up an account for any specific goals you have – an emergency fund, traveling, downpayment for a house, etc. This way, you cannot spend the money that has been reserved for something else. Plus, separate accounts for different goals help track your progress and how much money you actually have.
Create a “No-Spend” Challenge
A “no-spend” challenge is one sure way of resetting your financial habits and giving yourself a break from non-essential spending. For one stipulated period, be it a week or a month, make only indispensable expenditures like buying food, paying bills, and traveling. This would not only allow you to save some money but also let you contemplate where you are actually overspending and where you can cut off your expenses. At the end of the challenge, you may find that you’ve saved more money than you expected and gained better control over your discretionary spending.
It is not required that managing your finances should be complex. Automate your savings, unsubscribe from those monthly subscriptions you no longer want, and go by the 50/30/20 rule of thumb to continue reaching your financial goals while building a strong future. Pay off debt, save for a big purchase, or start investing-the preceding are some tips that might help one take control over money and be more informed with smarter decisions. Start small, stay consistent, and soon enough, you’ll see the results of your efforts.