Having a steady income is fantastic, especially after university. As it turns out, after receiving anything several times we begin to ignore the teeny-tiny changes. We go on autopilot and enjoy champagne with our guests until we feel the turbulence and have to sprint back into the cockpit to take control, and do it again.
I used to reach a point where I’d look at my accounts and say, “What do I have to do?” and “How long until my next paycheck?”
Historically, budgeting has worked in every case by giving every dollar a name before we spend it, so you, and the cash know where the heck it is going.
Then again, historically, we’ve never been accessible 24/7 to everyone we know, thanks to the Internet and almost feel like time has dwindled, or we may have dawdled.
As individuals, we have three general directions for our money: Needs, Wants, and Saves.
These are true for every dollar you’ve earned, or found. However, these three categories look different for everyone.
With a simple system, you can teach yourself to hog-tie your spending, and find room for fun and pay down debt. It is a ratio to funnel your money in the three directions they will go but with you in the driver’s seat.
Take your net income, whether you calculate it daily, weekly, bi-weekly, or monthly, and work to slice it into the ratio of 50%, 30%, and 20%, that is an IDEAL situation.
TIP: Make this fit your current scenario by moving 5 or 10% into another category. Again, we are all different.
The ultimate goal here is not to fix everything overnight; it is to use your time and money wiser moving forward, by quickly combing through everything you spend on.
Your first category the on the Bills you MUST pay. For example:
- Rent/Mortgage, Groceries, Credit card minimums, Transportation, Loans (student/auto), etcetera.
When you examine these payments, you’ll notice NOT paying on time WILL get you into a slew of trouble.
Next, are the luxuries, or “bills we want!” Also known as the part where you organize the joys of life. Calculate 30% of your income and examine the expenses. Sum up your:
- Date nights, Starbucks, Netflix, Clubbing, Retail therapy sessions, Gym membership.
By now you should be able to predict all of your inevitable outgoing charges, and should have no surprises. You have all of the power and need only to see it work for you to stay in control. With that said, we’ve covered the first and second part, not the final part, and there’s a reason for that.
Saving or “managing” your savings, is not easy. To save well, and save often it takes some thought, for a couple of reasons: You want to save for the things that will satisfy you, and you need to keep for when ‘life’ happens.