Whether you are earning in three figures or six, you will need to plan a budget.
Because budgeting allows you to plan your expenses, and hence cut off the ones not needed.
Wasting money on things with no promising marginal or investable conversion isn’t the wisest choice.
Money is a scarce resource. However, it is human nature to desire more and more: the more money one has, the more he/she will spend it on things that can’t be classified as basic expenses.
Saving money isn’t hard, but it does require some sensible budgeting.
Think about it: if you cut back on stupid expenses today, tomorrow you will have more money to spend on things that actually matter –assets like home, investment property, a retirement plan, or expenses like a college fund, marriage, children, etc.
Hack #1 — Treat Budget as an Activity, Not a Chore
Contrary to popular opinion, budgeting shouldn’t be considered or labelled as a chore.
One doesn’t need to have an accounting degree to visualize what expenses can be cut off and where to invest the saved money.
True, help from a financial advisor may come in handy when you want to cover your expenses, but it doesn’t always have to be that way.
The easiest way to treat it as an activity is by turning your budget into a step-by-step process. Once you have that, you can repeat it each month and get better at it.
Hack #2 — Create a 3-Stage Plan
How do you create a suitable financial plan that takes into all your unavoidable expenses such as paying bills, and expenses that aren’t fixed but still have to be paid? Expenses such as food or clothing?
All you need is a 3-cateogry budgeting plan that fits all your expenses into categories so you know exactly how much you need to spend on each category and where can you save up!
Eager to know? Let’s take a look.
- Fixed Expenses
Costs that remain fixed and have to be paid every month, life insurance, mortgage, etc.
There is no way you can escape from these or delay them as the consequences may not be in your favour.
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Moreover, these expenses are out of one’s control and must be made at all costs.
The only good thing about them is that they remain constant every month, and therefore are the first thing on a person’s mind to set aside cash for.
- Flexible Expenses
Similar to a fixed expense, a flexible expense also occurs every month and has to be made.
The only perk is that it’s management and control is in the hands of the person.
These are expense one can get around with but only if he/she is wise enough to cut back on things that can be lived without or substituted for anything cheaper.
All those expenses that you can easily survive without or cut down on without compromising the quality of your life fall in this category.
These are expense that can be cut off completely or delayed for some time –meaning, a person has full control over them.
When the goal is to save money, this surely is the easiest way to do so.
Categorizing these expenses into these three categories will make things less complicated.
If one finds themselves unstable financially, they can begin cutting down on expenses from the non-necessities, moving up to flexible expenses.
For instance, expense for a movie can be substituted for groceries and so on.
Hack #3 — Be Consistent
Making your first budget won’t be easy. Sticking to it will prove even tougher.
However, by repeating the task each month, and consistently monitoring and tracking your expense each week will help you get better at it over time.