7 steps to managing your budget without headaches
To keep money from being something that only brings you headaches and stress, you need to realize that it's not just about how much you make. You have to manage your income properly and be able to keep it in your pocket when spending is not necessary. You've probably had that situation where at the end of the month you look at your bank account and think, "Where did I spend all my money?"
Our small expenses may not be immediately apparent, but on average, we spend about 15 percent of our paycheck per month on unnecessary grocery shopping, tips and snacks without even realizing how much money is being spent.
Those few hundred dollars you spend on cafeteria food can help you pay your phone bill or electricity bill.
Calculate how much would be 15 percent of your paycheck, and think about what you could spend that money on.
Ideally, if you can set yourself a certain spending threshold that you can't cross. You have to be honest with yourself and soberly assess your options.
If you are interested in managing your money properly, I can advise you to follow 7 easy steps that will simplify your life and help you control your budget:
1. Set a goal for yourself
Have you ever wondered what makes you get up and get busy every day? What is your personal engine?
Once you can answer that question, write it down in your brain and don't forget it. That way, every time you do something, you'll know what you have to get to in the end.
Maybe your goal is to buy your dream house, or a new car. Maybe you just want to deal with all your debts. But don't forget that one goal and a clear desire won't do everything. You have to work to achieve your goal.
If you have multiple goals, try to focus on one. Set the right priorities and understand what will be most important to you at the moment. Thus, it will be much easier for you, because you will be constantly thinking about solving one task, and not be frustrated because you can't solve everything at once. Don't despair if the task is not given to you right away. Remember that only after some effort and clever actions will you be able to see the result.
2. Analyze your income and expenses
If you were asked right now the exact amount of your income and expenses for the month, would you be able to answer? Not likely.
Many people think that budgeting for the month is just keeping track of your expenses, and some think it's a waste of time at all. That's a mistake.
The main purpose of making such a budget is to have a clear plan and objective for your money. You will be able to take care of your resources and dispose of them in time, when it is more convenient and profitable for you.
Use free apps that help you keep track of your spending and income. By doing so, you will not only be able to count your finances and not exceed your options, but also keep track of what expenses need to be made on time: rent, for example. At the end of the month, you can get a report to help you make better decisions.
The main convenience is that you can just keep it all in your phone, with constant access to your budget. This way, you won't lose sight of all your spending.
3. Identify fixed and variable costs
The lower your expenses, the easier it is not to worry about not being able to cover them with your paycheck.
Start by identifying what is your constant spending and what takes the largest percentage out of your finances. For example, internet payments, rent, car insurance.
We spend the most on meals outside the home or transportation. We often don't know how much we have to spend when we walk into a random cafe or are late for something and have to
When you spend your money outside the home on food or transportation, most of the time it is not a fixed expense. That's why sometimes you have to spend more than you originally planned, and it doesn't fit into your monthly budget.
Understand that if your non-permanent expenses turn out to be too much and even more than your fixed ones, it means that you are spending your finances incorrectly. Try to find a way to reduce these expenses.
4. Reduce expenses
You should be able to ask yourself the basic question: is there anything you can save money on?
Buying clothes, a new electronic device, a coffee shop - these are all more often than not emotional expenditures that cause you to spend money mindlessly.
Determine what expenses you need to cut back on. Instead of watching TV all the time, think about reading a new book. Not only will it reduce your spending, you will also bring new information into your life.
Only two things are really worth spending money on: your education and your investments. If you use natural daylight properly, cook at home instead of spending money in cafes, and occasionally use public transportation instead of cabs or personal cars, you can seriously reduce your expenses, and at the end of the month, when you look in your wallet, you will be pleasantly surprised.
The money you manage to get should be put to the right use. You should not save money in order to spend it on other unnecessary things. Try to focus on things that can multiply your finances.
People who already have experience in investing try to increase their capital in order to put it back into business. When the cash flow reaches the point where you can cover your monthly expenses without having to be at work all the time - you have become a financially free person.
If you have to go into debt to cope with your expenses, it's not a pleasant way out and it will only play to your detriment.
If you've already been able to save some of your finances by cutting back on your unnecessary expenses, then try to dedicate some of your finances to paying off your debts.
Find a financial advisor who can help you allocate your money properly so that you can feel as comfortable as possible when you pay off those debts.
Selling your old stuff is not a bad way to get extra money to pay off debts. Check your attic, see some old clothes, appliances or tools that you no longer intend to use and sell them. Sometimes it happens that things we think of as junk can be very useful to other people.
Know how to divide your finances properly so you can better manage them.
If your finances are divided up into some small pieces, it is much easier for you to manage them and understand where you can take money from and where you can't.
I divide my finances into several groups and suggest you use the same way: taxes, education, pleasures, preoccupations, investments, and emergencies.
Keep a smart eye on your money and determine each month how much money you are willing to give away for each area. Adjust these groups according to your goals. Use your finances wisely, and then financial independence will come to you very soon.
Was this article helpful?4 Posted by: 👨 Amanda J. Howard