Spending money is very easy and many underestimate the value of clear budgeting. Very often situations arise when you spend more money than you originally planned, thereby striking a budget. Even if you are trying to put your money in order, sometimes you can exceed your expenses.
But if you want to manage your money wisely, then you simply have to apply some simple tips that will help improve your personal finances. You need to start with the implementation of the approach to spending and savings, moving along the logical chain to setting and achieving long-term goals. I mean, you can’t just decide to buy a house and immediately competently organize its purchase, you need to start gradually.
Plan Your Budget
Budget planning is where absolutely any advice begins. In simple terms, a budget is not something complicated, it is just a list of your income and expenses. Most people have only a few sources of income and it’s not difficult to write them down correctly. Things are much more complicated with spending.
Every day we make tens of expenses, and in a month some people may even have three or four hundred expenses. And yes, all these expenses must be taken into account and planned. To do this, it is enough to break the spending into several categories and estimate how much you spend on them on average and how much you would like to spend.
Every time you make a waste, just write it in one of the categories. Yes, first you will exceed the established limit and will violate your plans. But after 2-3 months you will intuitively feel how much you can spend so that at the end of the month you do not break the limit.
Determine the Amount of Savings
Savings are very important, in fact, your whole life depends on savings. Most experts advise you to use the 50-20-30 rule, but if your income allows, it is better to save 25%, instead of the standard 20. You can spend the remaining 25% on entertainment and what you like.
This plan is the best way for those who have not previously budgeted at all. Yes, it is not ideal, since it does not contain a clear description of your expenses and you yourself may not notice it, spend on some things much more than expected. But its main advantage is simplicity. If you do not want to budget and plan your expenses before a penny, then this is your choice.
Start Auto Savings
It is hard psychologically to save money and many newcomers fail at this stage. Whatever happens, just set up auto-save. To do this, you can use the service of your bank, which allows you to transfer a certain% of each transaction to a savings account. 1-1.5% of each operation will save you $ 250-350 per month and you can save a substantial amount of money by the end of the year without even thinking about saving.
Reduce Ineffective Spending
Take some time to analyze your expenses and reduce the cost of those that are ineffective. Consider your spending and refuse to buy what you do not need. Each person has a set of habits that are really not needed, but we are used to spending money on these things and consider them as the norm. Such expenses may include coffee in the morning from a coffee shop, expensive lunches, expensive clothes, or paying for online services.
When choosing which expenses to reduce, know that no one except you will say what is really insignificant. You must conduct the analysis yourself and choose at least two things that you can throw out of your expenses without compromising your well-being. At first, it will seem that the savings are negligible. But even 3 dollars a day, that’s 1000 dollars a year. Just prioritize and save some money.
Don’t Be Afraid To Spend Money
After reading the previous paragraphs, you might get the impression that you need to “spend as little as possible.” This is far from the case! You need to spend a lot, you need to spend wisely. Don’t be afraid to spend money on seeing a doctor, checking a car, or calling a wizard if something goes wrong. Yes, when the problem is not significant, it seems that you can not spend money on it and save a little. But spending a little money now will save you a lot of money in the future.
Ask Yourself Questions
This will sound trite, but before you buy something, ask yourself some basic questions. In practice, spending money, we are guided by the banal “I want”, not paying attention to other factors. Here are questions to help you save money:
- Do I really need this?
- How many hours have I worked for this?
- Can I spend this amount?
- Can I find a cheaper analog?
- Will it benefit me in the future?