10 Steps to Effectively Manage Your Budget

Almost everyone has a complicated relationship with money. Someone lives without looking back at tomorrow. Someone scrupulously saves and does not spend savings. Some may think that earning big money is a lot of the elite. But money is not a sacred item. Everyone can learn to handle them and everyone can save and increase them.

How to Protect Your Savings

Here are some tips to help you save money right now. Perhaps some of them are on your hearing. And all because they work.

Start counting money and keep a budget

Why do you need to do this? When you don’t know how much you are spending, you cannot optimize your expenses. You don’t see what areas you can save on.

To the store – only with a list

A shopping list saves time and your budget. The main thing here is to follow the list and not go beyond it. By the way, online shopping is less dangerous than offline stores. When you are standing in front of the shelves, there is a higher risk of buying whatever you see first.

Think about which cost items you can exclude

It does not mean that you need to degrade your quality of life. For example, instead of buying groceries from a nearby store, it is better to make a shopping list in advance. Then you can go to the store and buy what you need in bulk. Maybe use joint purchases and sharing services: for example, to exchange children’s toys. Or instead of take-away coffee which you might drink every day, buy a coffee machine for home and save a lot of money. You can find ways to cut your spending without compromising your quality of life.

Shape the airbag

A fairly popular, but very effective way is to save 10% of any income. Have you earned $50? Set aside $5. Earned $15,000? We put in $1500. This is your airbag.

Look for additional sources of income

There is a wide choice: from hobbies to investments. Think about what you can do right now. If you understand that you lack competence, you need to learn it. You shouldn’t do one thing. There is always a danger of being fired, laid off, finding business in a desperate situation (like during quarantine, for example). Each can be realized in several areas.

Build Stronger Financial Muscles

So, we figured out how to save money – now we will multiply. Follow these ten steps, and you will feel that the funds and confidence in the future have become a little more.

Step 1. Control your expenses

We start an Excel spreadsheet or install some kind of application. Record expenses and stay on our budget. You must understand what your income and expenditure are. And make sure that the expense is always less than income. That is, you are rich in this scheme only if income minus expenses = more than 0.

Step 2. We divide expenses by areas (envelopes) and never climb from one envelope to another

These are the so-called “cash envelopes.” Separate funds by areas. For example, you have expenses for food, entertainment, clothes, payment for an apartment, a house, a nanny, a kindergarten. Layout your money based on your past months’ spending. Let’s say for charity; you allocate 10% of your income. And 10% – to help parents, 10% – for education, courses, training, books. For example, you set aside $100 for training this month and did not spend anything. Next month, you also save $100 – and now you already have $200. You can take a steeper course or save up for something more.

It is essential not to go from one envelope to another. That is, if you set aside money for training, then you do not fit into this envelope to buy jeans for yourself.

What if something suddenly happened? If you are worried about your real estate and property, make insurance. Insurance is inexpensive, but it saves you a lot of money.

Step 3. We make separate envelopes “force majeure” and “spontaneous purchases.”

Start separate envelopes “force majeure” and put 5-10% of your income there. If something happens, then you will have the money to deal with unexpected issues.

If you are prone to spontaneous purchases, you first need to ask yourself the question: “What am I replacing with this purchase?” It may be a source of emotion or pleasure – just think about it. And start a separate article on spontaneous purchases in your wallet, account or card. Let there be an amount within which you will buy something. The amount ended – and the impulsive purchases ended.

But what if your half does not support this method? An example is essential here. Try to save money for 4-5 months and then buy something useful, like a vacuum cleaner or refrigerator. So you will show that it is thanks to the “envelope” that a new thing has appeared in your house. And then your other half can think hard.

Step 4. Never get into “bad” loans and always pay off all debts

There are two types of loans: good and bad. “Bad” credit is a loan that does not bring you money. For example, you buy an apartment with a mortgage – this is a “bad” loan. If your mortgage payment is approximately equal to your rental amount, then it is more logical to buy an apartment. But do not forget about the fact that when buying on a mortgage, you freeze money on the first instalment. You invest in renovations and spend money on furniture, appliances, and other things. “Good” loans are loans that generate income for you. For example, you take out a mortgage and rent out an apartment.

If you often borrow money, then you need to understand: most likely, this is a psychological habit.

That is, when you start living not on your own money, you have a feeling of permissiveness and omnipotence. We must learn to perceive their capabilities adequately.

Step 5. Improving the quality of your life. Every month we find three ways that we can implement in our life.

Living on expenses is right. But we must not forget that you need to please and reward yourself. Think right now, how can you reward yourself with the same income? Maybe he goes for a massage and buys something for himself, without going beyond the budget. Use apps that help you save money or get some kind of discounted services, such as couponers.

Step 6. Increase income (at least by 10% every three months)

You can’t just say, “I will increase my income” and hope for the Universe. Think about how to increase your income. Set the bar: for example, by 10% every month. Of course, a lot depends on the initial amount. If you are earning $300 now, then it is much easier to do. It is real to increase income by $30 every three months. 

Think about what you can do in the first direction – at your current job. Brainstorm: write what you are doing now and how you can increase your income. Talk to your boss: maybe your boss will not mind giving you new tasks and paying money for it. If you have your own business, then you can improve your service: give more for more money.

Step 7. Learn to maintain a family budget and prescribe a financial plan for the next year

It is essential to do this so that you understand your savings and expenses. You must learn from what resources and money you will go somewhere and buy something.

Step 8. We learn to live on 90% of our income. We don’t spend the remaining money under any circumstances. This is our wealth fund.

Again, 10% of any income should be set aside. Consider that this is not your money – forget about them and do not waste them. This is your wealth fund.

Step 9. Learn to increase money. Finding five ways we can start doing this right now.

Even if you have money, it is dead weight. This is just okay presently, not very good for the future. Think about where to invest, so that they bring you income right now. Of course, you shouldn’t invest somewhere without understanding the process. First, get into the topic of investments, and only then invest your money.

Step 10. We devote 30 minutes a day to financial education: we read books, take courses, watch videos, play economic games.

Read books, take courses, listen to podcasts, play financial games. Choose what works for you and develop your financial planning skills.

You can also read:

Discipline and Pleasure: Where to Start Self-Development and How Not to Quit

How to Plan a Career That Will Keep You Always in Demand

Leave a Comment

Your email address will not be published. Required fields are marked *

Scroll to Top