Creating a budget and assessing your financial goals are the first steps in gaining control of your money. What seems like an incredibly tedious project can be simplified in a few easy steps where you can make your spending align with your personal values.
Know Your Net Income
First, identify what money is coming in. Be precise here as it’s easy to make mistakes. Remember to subtract your employer deductions for Social Security, taxes, 401(k) and flexible spending account allocations.
Track Your Expenses
Thanks to technology, the daunting task of recording your expenses can be quite simple. If you are using a smartphone, there are many apps that will organize this process for you. The trick is to input every expense as soon as it’s made. Save your receipts if you don’t have time to input immediately so you know to do it later. If you don’t use smartphone, a pencil and paper works just fine.
Apply the 50/20/30 Rule
Once you’ve determined where your money is going, try to allocate 50% towards fixed expenses or expenses that are the same every month such as a mortgage or debt repayment. Put 20% into savings and retirement and the remaining 30% should be allocated towards variable expenses.
The trick is to plan for next month’s expenses and income so you’re not surprised. Try to calendar important appointments that you know will cost money such as servicing your car or an annual home improvement.
Look for Ways to Spend Less
Get creative. You will be surprised how all the little things add up. Try buying generic brands over brand name or experiment with cooking at home. See savings fast by bringing your homemade lunch to work instead of eating out.
Find Ways to Boost Your Income
Do you have things around the house that you no longer use and could potentially sell online or on consignment? Maybe the brand new tent you bought for that canceled camping trip a few years ago could go. Do you have a hobby or a skill that could be of service to someone else?