As a fully functioning adult who is trying to get her life together, I adopt practices that would help make my life easier. Among these are ways to be financially stable.
We have to take care of our financial health the same way we take care of our mental, emotional, physical health, among others. One way to do so is by budgeting and sticking with your budget.
Although I have struggled at times, I am lucky to be surrounded by friends who have taught me over the years their best practices. So here are the tips I compiled from my financially secure friends. Read and learn!
1. Plan It (Weekly and Monthly)
Budgeting is easy if you can foresee it. Write down all your expenses monthly – rent or mortgage, electric, heat, water, internet, phone, insurance, food. Whatever it is that you spend on you write it. Then, do a ballpark of how much you spend on these every month. If possible, you can minimize your spending by cutting out unnecessary expenses such as the gym membership you don’t use or the monthly book club membership you are not reading. This way, you can anticipate how much your expenses are and allocate enough funds to the necessary ones.
2. Use Cash On The Daily
This is effective for many people. While we live in a world where swiping our cards is convenient, using cash would allow you to stick to your budget more and in an easier way. With the projected expenses you made in number 1, you can have the amount of cash in hand therefore making you stop spending when your cash runs out. If you get tempted to splurge, as we do sometimes, a cashless wallet is a good signal that you have reached your budget for the week/month.
3. Envelope Method
Envelope method is the combination of doing number 1 and 2. With your expenses projected, and cash available, you can segregate the amount of cash you will be needing at a certain time. Say for example, in a week you can keep your grocery money, bills money, gas money and others in envelopes, properly labeled with the fund name and the date of the budget. Seeing where your money go and how much of it goes to your needs will keep you out of debt and within your comfortable budget.
4. Understand Why you are buying it (Need vs Want)
It is easy to purchase things on impulse, however, it is difficult to pay for them once your impulse is gone. You might want to kick yourself for giving into that impulse, so here is a tip – think if you really need the purchase, or you just want it. Leave the online cart be for a day or two and go back to see if you really need it. Most of the time it is just an impulse.
5. Estimate When You can Pay it Off
Credit cards are great to have, as long as you have discipline. My financial planner coach taught me that you can get a credit card with no annual fee, and purchase needed items with zero interest and payable in installments. Paying the minimum required amount (and interest) is not enough for you to conquer your debt. Set a goal when you want to be debt free – in five years, or ten? Then calculate how much monthly payment you will have to make in order to slowly, but consistently pay off the debt. This way, your short term actions will lead you to your long term goals. Budgeting at its finest!
There you have it, the five ways of setting a budget – tried and tested by my friends and me! I hope these tips could help you strengthen your financial standing. Try it out!