Budgeting is very simple and very important yet the most neglected part of one’s life. We often end up having debts and liabilities on our hands because, in the first place, we forgot to make a budget plan. So, what happens next? We tend to overspend, borrow money from other people, lend from the financial institutions, and end up with no savings in the bank. Writing down all your expenses isn’t enough in doing budgeting; you should also consider other things.
Are you familiar on the 50-20-30 method? If you haven’t heard of it, it is the time to know about it, a helpful tool to keep your financial resources organized.
So, let’s start using this method, so you can now make your budgeting. First, you need to determine the exact amount of your expenses because we are going to need this information and group them according to sections. You can use your last month’s expenses for reference and list down all your expenses on your record book. Let’s say you have listed them down; now, you have to categorize those expenses into ‘fixed’ and ‘flexible’. Fixed expenses are necessary expenses that you don’t have control over while flexible expenses are also a necessity but you can control how much money to shell out.
So, the 50-20-30 method depends on you. Let’s take this for example:
50%- Fixed expenses such as home rental, internet bill and tuition fee of your child
20%- Savings in the bank and emergency funds
30%- Flexible expenses such as food and gas
If you have a net income of $3,000, then $1500 will go to fixed expenses, $600 for the savings and emergency funds and the remaining $900 for the flexible expenses.
Seems legit, right? However, this kind of rule doesn’t seem to be for everyone. If you are going to retire when you are old, do you think 20% savings is enough to sustain you on your jobless days? Although the 50-20-30 method seems a pretty a good way to start a budgeting plan, there are other things you might want to see first. Needs versus wants- for sure, you have heard of this method. If you are going to give up some of your flexible expenses, then your 20% savings might go up and the possibility of having your dream retirement will be more likely.
Managing Your Money
- Deposit on your saving accounts at least 10% of your income.
You can have multiple savings account and categorize each account depending on what you are saving for, such as an emergency fund, schooling fund, and retirement fund. The technique is to immediately deposit the percentage you want to your bank accounts and treat that as your expenses already. If you will not do this immediately, your money will just be gone with the wind.
- Distribute your money to your important expenses.
Distribute amounts of money to each of your important expenses. Each amount should last until the time of your next pay roll to avoid borrowing from other people. Have a checklist of your expenses and distribute them according to priority. Do not let important expenses slip with payment such as electric bills, mortgage, insurance, debts, etc.
- Do not forget about your other expenses.
After budgeting the money for important expenses, see how much is left and allocate to other expenses. These expenses are groceries, food, maintenance, medicines, etc. Make a list of your priorities and see if you can use some alternatives, so the money left will be sufficient.
- Spend your leftover money wisely.
After all the budgeting and then surprisingly, you have some leftover money, you should spend that wisely. You can put it in the bank or put it in an important expense that is due next month or you can have an investment out of it. It is up to you, so make a wise decision no matter how big or small the money is.
The Bottle Method That You Can Use
This method is very effective because you may be able to see what is happening to your money. You will need empty and clean jars (the number of jars depends on you), blank labels and a labeling marker.
1st bottle: 60% for basic needs
This bottle will cover all your basic expenses such as electricity and internet bills, insurance, daily allowance, food, gas, etc.
2nd bottle: 10% for retirement savings
This is for your future, so take control of not using it for anything even on emergency- you should have another bottle for that! You can take the money on the bottle in the bank on a regular basis just to be sure that your money will be saved.
3rd bottle: 10% for emergency fund
Make some savings for an emergency because you will never know when to need them. You should also deposit this to your bank account.
4th bottle: 10% to self-growth
If you have children, you should start saving for their education. You can also use the money to enhance your career or skills.
5th bottle: 10% to pleasure and other expenses
If you want to have a vacation someday or will attend a wedding or any occasion, you should save ahead of time.
How You Should Save Your Money?
There are many ways on how to save money. You just have to be wiser in spending your money and at the same time reducing the unused expenses.
- Avoid data overcharging by reducing your data usage.
Are you getting mad when your phone bills suddenly get high? Don’t worry, you can maximize your phone bills without overspending on your data usage. Did you know that there is a free app known as Onavo? This app works like magic and you will save on your phone bills and use more data at the same time! This app will lessen the data usage you do in every surf, email sent, and tweet. The app uses the compression technology to maximize your data usage and it even allows you to keep track of how much data you are using on each thing you do online. This app works well with Apple’s iPhones and iPads and as well as Androids.
- Clear your cache if you are looking for airfare
Are you familiar with the author of Financially Fearless and the founder of Forbes contributor LearnVest? She is no other than Alexa von Tobel. According to her, you should empty your cache during the times you are looking for airfare. The websites of airlines know that you are browsing, so they will increase the price in just minutes as this blogger has experienced it and you will see a $50 difference on the airfare in just the same day. So, do not forget to clear your cache and delete your browsing history if you want to save.
- Take advantage of the opportunity of giftcards at discounts and use them.
According to the recent author, Alexa Von Tobel, you should search the web for giftcards at discounts. After purchasing these giftcards, you can use them yourself and take advantage of the discounts you are entitled. You can check out some of the giftcard websites like GiftCardGranny and CardCash. You can also sell your giftcard at CardHub if you don’t want them to other people who are interested in using the gift card. You can sell your giftcard at a higher price than when you purchase it, or you can get a $100 worth of giftcard at half the price when CardHub has an ongoing giftcard exchange. You will get it for just $50 and you can purchase $100 worth of items, or better yet, wait for a sale and you will get more than the value of the card!
- Lower the thermostat.
By lowering your thermostat on not so cold weather, you can save on your bill. This technique will make your average costs lower on the months you are keeping your thermostat down.