Maximize Your Income With 1 Tool

images (27)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.

50:30:20

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.

4 Effective Questions: Saving Money Quick and Proper

download (78)You have learned to organize your present incoming with your current expenses. You have tipped the scale to work in your favor and have found a surplus. Too often, our ‘extra’ cash is wasted. Spent on ATM fees, the interest on your next card statement, or knick-knacks you buy as you go about your week.

The emotional trouble with saving is the decision to hold back spending because ‘you must shield yourself from enjoying life or indulging.’ And this is so difficult if we only think about it. Saving is a habit; you may put away $10 a week, some can save $100 or more a week. In either case, the driving force behind finding a huge lump sum after a week, months, or years, is the habit. And we are only talking in the short-term.

There is an easy way to get started with valuable Savings. Start with your emergency fund. Why? The emergency fund carries the cash that keeps you moving forward when “life” happens. A few examples are moving, career change, job loss, or sickness.

The design of the emergency fund is to have a specific amount of money at your disposal. As an example, sum your life costs for a month. Let’s say $1000. $4,000 will let you continue living for four months while you cope, re-adjust, or transition your life.

This account must have the following criteria (these can get you started):

(1) Time-period

– Will your account hold you over for 3, or 6 months?

(2) Purpose

– Assign an account to one expense, like rent, or total living expenses.

(3) Control

Do you remember why it is called an emergency fund? Be considerate and spend on vacations and personal gifts after you have met your saving quota.

TIP: Focus on getting started and not on researching where to bank. I recommend searching for a known online bank – it adds a buffer, and safety.

Now that you have an emergency fund ready and have topped it off move on to saving for what you want. You have mastered funneling your money, now aim it toward the future.

I want to leave you with a few questions to ask yourself; they will make the planning of anything you need to save for – easy as pie:

– What amount of money will keep me safe for 1, 2, or 3 months? Or, what amount of money do I need? (Set a goal to hit.)

– How much money can I afford to save every week or every-other week? (Set a doable-baby-step plan.)

– What exactly will this lump-sum be used toward? (Give purpose to your goal.)

– Can I keep this aside, and start other savings account for fun I want to have? (Dedication to your goal!)

Do some homework, and find how you can help yourself. Don’t just save, but save with a plan, with purpose, with passion.