Managing money responsibly is a skill just like arts & crafts or cooking. This comes naturally to some people, while, on the other hand, others have to invest some time and effort to master it. Clearly, you want to enjoy life to the fullest, buy things you desire, travel the world, etc. However, sometimes this is not possible, especially if you are paying off some debt, or your income is simply too low to accommodate the standard of living you are striving to achieve.
Well, if you are having some issues with personal finances, and feel trapped in a vicious circle of debt and expenses, don’t lose hope just yet. In this article, we will provide you with some tips that will enable you to save money and boost your bank account. If we don’t cover the point you are interested in, visit thewealthyalchemist.com to learn how to make money, save money and proper budgeting techniques, while we tackle some of those below.
Budgeting is the key
First things first, a lot of people who face this type of difficulties don’t have a plan to follow, so they spend money recklessly, without keep track. Hence, they get baffled by the amount of money they spent at the end of every month. The only way to prevent this from ever happening to you again is to create a budget every month and stick to it.
How to do this? Well, actually, it is quite simple. Start by writing down your income and an approximate amount of money you spend every month. When it comes to expenses, you should only include those that you cannot eliminate, such as rent, utilities, groceries, and so on.
Once you subtract the expenses from the income, you will get the amount of money you have at your disposal until the end of the month. Track down every time you pay for something. It doesn’t matter if it is the movie ticket, a meal out, or a snack you bought at your lunch break. Then, go back to your budget and analyze your spending. If you went over the limit, then you need to make some changes. You can either eliminate some unnecessary expenses like dining out, our think of a way to increase your income.
Reduce the bills
Okay, this is an obvious thing you have to do, but still, many people find it to be the most challenging one. Naturally, some of the fees are fixed, such as rent or debt payment, so there isn’t really a lot you can do about them. On the other note, many can be significantly reduced.
For example, you can start planning meals on a weekly basis, and purchase groceries at a discount or using coupons. Yes, we know, this requires you to invest some time, but you would be surprised to learn how much money you can actually save by doing this.
Next, you can cut the electricity bill by unplugging all the devices and appliances when not using them, or switching to energy-efficient light bulbs. Moreover, do you really need cable? Yes, we know this sounds terrifying, but let’s be honest. Nowadays, there are numerous streaming services you can sign up for that are significantly cheaper than cable TV. In addition, you should also take the eating out habit to a minimum. We are not saying that you cannot go out with your friends every once in a while, but instead of purchasing meals every day for your lunch break, you can cook then at home and bring them with you to work.
Needs vs. Wants
If you usually spend money without thinking twice about it, this is the most significant step you have to take. Before you make any purchase, you have to consider whether you really need the item or you just want to get it. This is a habit that you have to develop as quickly as possible if you want to get your finances back on the right track, and yes, there is a significant difference between these two groups.
Let us give you an example. You are strolling around the town, go window shopping, and you see a pair beautiful boots at the display. Your first urge would probably be to walk in and get them. Nevertheless, before doing this, you have to consider, do you really need them. Similarly, the new iPhone is out, and it costs a small fortune, but it is advertised as the state-of-the-art device, so you have to have it. No, wrong. If it is out of your price range, consider getting another model, and you can only do this if your current smartphone is not functioning properly.
Build an emergency fund
Every single person in the world needs to put some money aside for the rainy days. You can never know when the disaster is going to strike, so you have to be prepared. Maybe your car breaks down, or the washing machine stops working, your home gets flooded, etc. These are all instances when you will have to pay for damage or repair almost immediately, and it is when an emergency fund comes in handy.
Yes, this is another item that you should add to the list when setting up a budget. When it comes to the funds that you should put aside every month, it completely depends on your income and the money you are left with upon paying all the bills. You can opt for 10% of your monthly salary, or go with more if you can afford it. Whatever you do, try not to skip this item, because you can never predict when you will need that money.
Set a goal
This is one of the best ways to motivate yourself to make all the above-discussed changes. By setting a goal, you will have a clear vision of why you are doing this. It can be going on a vacation you have always wanted without having to worry about every last penny you will spend, moving to a better apartment, or getting a new car without a loan, etc.
Making some lifestyle changes can be quite difficult. This is true even if you know it is the right thing to do, so creating a goal you are striving to will make this entire process a lot easier, and believe us, there isn’t a better feeling in the world then achieving it.