Managing your money can be very daunting and stressful. The way you save and spend your money can have a significant impact on your daily life. Knowing how to manage your income can help you oversee your money and keep them to use in long-term. If you are feeling stressed, take a look at a few easy tips below.
The Simple Financial Rules
Different people will have different ways to manage their finances. It depends on your habits, daily activities and the way you choose to spend your money. Despite all the differences, there are always some rules that never change you can follow to manage your money better.
- Spend less money than you earn: If you earn X amount of money a year, and you spend Y amount of money a year, you need to make sure that Y is less than X. Try not to spend exactly as much as the amount you earn because you need money to prepare for emergencies or any sudden changes in your life. Limiting your spending will allow you to save more money and deal with unexpected things happen.
- Have plans for the future: Save an amount of money each month to prepare for emergencies like medical bills or other inevitable things. You should always have plans for the future to limit over using your income and to ensure you can survive when you are unable to work anymore.
- Invest your money: Do not put all your money into a saving account. Instead, make your money grow by investing them in the right way. You can start a business, or attend some courses to find a better job.
Setting up a budget
To control your finances, setting up a budget is the best way to make sure your money goes to the right place. Since the beginning of your career, keeping track of your expenses will prevent a lot of financial issues. A great way to work out your budget is using a spreadsheet or use a calculator and a pen to write everything down on paper.
Some people like to allocate their money into very detailed expenses. Others think this way is too strict and is hard to apply. Alternatively, you can divide your money into three categories followed the 50/30/20 budgeting rule.
- Needs (50%): Start by calculating how much money you need each month for regular life. The ‘needs’ include things like groceries, housing, electricity, and other payments that severely impact your quality of life.
- Wants (30%): Any payment you spend to do things you want except for the minimum expenditures listed above. You may pay more than you think, but if you strictly control your spending by setting a maximum amount of 30% your income, everything will be fine.
- Savings (20%): The last 20% of your income will be saved for emergencies and retirement accounts. The ‘savings’ also includes money to spend on vacations, or long-term savings like a house, a new phone or a TV.
Life will be so much easier when you have good skills to manage your money. With careful planning, persistence, and some time to keep track of your habit, you can improve your financial life without any struggles.