How often do you struggle to make ends meet because you couldn’t manage your money properly? Do you really have to be an accountant or a math whiz to handle your finances better?
It’s better to limit your transactions and develop financial skills at a young age unless you want the burden of debt later on. It also has an impact on your credit score eventually. So, if you are living on allowances or salaries based on a weekly or monthly basis, it is best if you set a good financial habit.
The first thought that comes to mind when hearing about financial management is that you won’t be able to enjoy a lavish lifestyle any longer. Well, that’s not quite true. It means you are making wiser decisions regarding purchases instead of buying everything at sight. It ensures you confirm your funds for specific purposes and bring the best out of the opportunity financially.
Just because you have the money, doesn’t always mean you should buy something. The concurrent bills and expenses need to be taken into consideration at all times. In this article, we talk about managing your finances better and saving as much money as possible.
Have a Budget
Many people despise the concept of creating a budget because they consider it to be a boring process. The process of listing your expenses, adding up numbers, and making sure both sides of the ledger fall in place isn’t a fun activity.
However, it only takes a couple of hours to do so, and if you are bad at managing your money, should you even be having excuses? Try a different mindset. Instead of thinking of the boring process, why not focus on the value of creating a budget and how it may shape your life?
An hour or two a day will surely get your spending on track in no time.
Use the Budget
Some people have a monthly routine, whereas others have to make daily entries. The problem with monthly updates is that at one point you might let your budget accumulate dust in some bookshelf or cabinet.
We recommend making daily entries into your book. Mark up two pages for a day- one for whatever money you earn and the other for all your expenses. At the end of the month, you can calculate whether you have spent more than you earned or if you were able to save some cash.
You can refer to your budget to guide your spending decisions. Throughout the month, as you enter the bills you paid, you have an idea of how much money you have. In the long run, you start realizing how to save more and eventually cut down on a lot of unnecessary expenses.
If there are fixed bills you have to pay every month, for instance, rent and facilities, make sure to highlight them for your convenience. The more detailed your book is, the more colorful you make it, the more attractive and appealing it becomes.
The Rule of 3
Once you realize you have paid all the bills and have money to throw around, you’ll inevitably want to use it for some entertainment. You may want to buy a fancy shoe or that new phone that hit the market so well.
But this is where your consciousness should come into play. You shouldn’t be making big purchases every now and then. Instead, it’s best to save money for the future, perhaps an unprecedented event, rather than wasting it on something you don’t direly need.
Rather than going crazy with the leftover money, save it. You might wonder, when is the right time to spend the money then? A simple trick is to triple the price of a product you want to buy. If you think you can afford the 3x price, then go for it. If not, you should know now is not the time.
Track Your Spending
Contrary to popular belief that big purchases make you lose your money, it is actually the small purchases that take up a lot. A little money spending here and there accumulates to a grand total number at the end of the month.
Once you start putting in entries for the budget, you will be able to track your spending. A good idea is to save the receipts you acquire. After a while, you will realize where you lose the most of your money once you go through the spending journey.
If you are throwing money at restaurants, eat home more. If you are using public transport often, try taking a walk sometimes. Track your spending, and cut down the costs.
Don’t Commit to New Monthly Bills
Just because you qualify for a loan, doesn’t mean you should always take it. The same goes for bills which hardly need to make. Don’t read the newspaper much? Stop paying for it.
If you have subscribed to any website or anything in particular which you think you can live without, losing it from your life won’t affect you much. It is up to you to decide on which items you wish to spend on as monthly obligations. If you already have rents and other facilities to pay for, don’t add more to the plate.
Contribute to Savings Regularly
A good way to make a financial habit is to divide your income into several parts. We recommend segmenting it into 3 parts- the fixed bills, the savings, the expendables.
Remember when we mentioned highlighting your monthly fixed bills? You will eventually have a grasp on the least amount of expenses you have each month. Store that money aside to pay for these concurrent bills.
Next, you need to add money to your savings. Among the leftover cash, divide it into a 2:1 ratio. The larger sum of money is for your savings. Make sure you contribute to your savings every month.
The smaller amount is for you to enjoy in the said month. Once in a while, you can treat yourself by reversing the ratio.
All these are actually easier said than done. It won’t be easy to start. But once you get the hang of it, your life will be much more organized and your finances will be better off.