If you are serious about maintaining your finances, you’re in luck. This guide will help you manage your budget wisely and live below your means. The best part is you get to enjoy what you want.
You don’t have to spend a lot of money to have fun. But you can cut the dead weight wherever possible. A lot of people seem to have a habit of splurging more money than they have to.
We’re here to tell you that’s not the case. The road to true financial freedom begins now. Let’s get started.
Consolidate Your Debt
Debt weighs you down. No doubt about it. Especially if you let it build up over time. It may be a good idea to get rid of credit cards.
Specifically, the ones that are high in interest rates. If you want to make the switch to something new, there are plenty of credit card comparison tools that you can check out.
You can switch out your current high-interest-rate cards with something that will be much lower. Or you can pay off the debt and get rid of credit cards altogether. It’s your call.
Debt isn’t always credit cards. You could be wrestling with student loan debt. Or some other kind of debt.
You can consolidate the debt with the help of a professional that can get this done. You can make repayments each month (even if it’s a minimal amount). A community bank or credit union may be your best option.
Make the 50-30-20 rule your friend
If you want to keep a budget, you’ll want to abide by what is known as the 50-30-20 rule. You’ll want to take your after-tax income and calculate it into three different categories:
- 50 percent on needs
- 30 on wants
- 20 in savings
Let’s say your annual after-tax income is $100,000. This means $50000 should be budgeted for your needs. $30000 goes towards your wants and the remaining $20000 will be tucked away for savings.
What exactly constitutes needs, wants, and savings? Let’s break this all down:
Needs
- Rent/mortgage
- Utility bills
- Transportation (can include gas, vehicle maintenance, etc.)
- Repayments on loans (if paying a minimum amount)
- Groceries
Wants
- Streaming subscriptions (Netflix, Hulu, etc.)
- Gym memberships
- Vacations
- Clothes
- Eating out
- Food expenses (non-essential groceries)
Savings
- Emergency expenses
- Down payment for a home (if you are renting)
- Retirement
- Just because
Now that you know what belongs where it will give you an idea for you to sit down and plan out your budget. What exactly will be your needs, wants, and savings? What will be the reasons why you are saving to begin with?
One of our recommendations is to use your savings for emergency expenses. Things happen even when we least expect it. You will need to tuck away money knowing it’s there in case something happens.
Can you set aside money for something else? Sure you can. You can set aside 10 percent in emergency expenses and another 10 for whatever else (such as a home down payment).
Final Thoughts
There is no shame in living your life on a budget. You can do this without being stingy or a tightwad. It takes proper financial discipline such as knowing what your needs are compared to your wants.
Also, saving up will be crucial. Especially when you don’t want to be shocked by the expenses. An emergency expense can be costly – but you won’t feel stunned if you have enough saved up.
We hope this guide has been helpful. Let us know how your financial picture is shaping up after using the tips we’ve listed above.
