Personal finance is something that every individual that has their own money should take it seriously. Budgeting, in a nutshell, is a plan for your money for a specific purpose before certain periods.
For this reason, there are monthly budgets, yearly budgets, and budgets on a weekly basis. Having a well-prepared budget that suits your personal goals is actually very beneficial because you’re intentionally spending your money, and you know where your money goes. If you haven’t had a budget in your life or you struggle to keep up with every expense, we have compiled a list of free tips that will help you regardless of your income.
Zero Budget
Zero-based budgeting is a popular technique for managing your expenses. It’s actually more important to start budgeting at the beginning of the month. With a Zero-based budget, you will make a plan to cover your utility bills, groceries, rent, and other necessary expenses.
With the Zero-based budget, you deduct all of your expenses from your income. On top of that, your monthly income should be further decreased by the size of your debt and other expenses that include costs for eating out, parties, and gifts.
This doesn’t mean that you will be left with zero assets in your account, but that you have a detailed plan for your income. It is also advisable to leave a buffer of $100 for any unexpected costs.
50/30/20 Rule
In the beginning, it’s important to stick to a simple, fair framework. This will allow you to manage your expenses better. This is a simple framework that works for every beginner. Based on the 50/30/20 rule, you are required to allocate about 50% of your income to your own personal needs. It includes utility bills, food, housing expenses, and any other important expenses that you need to pay. So, in short, 50% of your income should be allocated to your needs.
The 30 rule is allocating about 30% of your income toward your ‘wants.’ For example, you can use about 30% of your income for gifts, going out, dining out, or any other non-essential expenses.
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Lastly, about 20% of your income should be oriented towards savings or, if you are in debt, towards your debt repayment. The rule is easy to follow, and it will allow you to track your expenses and make sure you don’t overspend.
Automate Your Savings
Even though a lot of people think that putting money towards savings goals isn’t something that should be done on a regular basis, actually, it is the opposite. You should have savings account for rainy days – whether an accident or long-term financial goals. You can automate your savings which will require minimal effort and will not get you thinking that you’re specifically allocating money to your savings account from your monthly income. It is a great way to stay accountable in the long run and reach your main financial goals.
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