Managing money can look tough at first sight. But, when viewed with an analytical approach, financial habits can be an interesting mission that can lead you to financial abundance.
We all have those big financial dreams:
Saving for that dream vacation, you’ve always wanted.
Building an emergency fund for peace of mind.
Paying off debt to unlock financial freedom.
However, somehow, these goals often get out of reach due to bad financial habits and management because every month, you go for unnecessary purchases after your salary gets credited.
If you don’t want to put yourself wondering at the end of the month, where did my money go? Then, this blog is for you. For this, you don’t need to be a financial expert to manage your money; you can simply manage your expenses at home with these smart tips on financial management.
Monthly/Weekly Budgeting
Without a budget, it's easy to spend money without giving it a second thought and lose track of your financial goals. Instead, manage your monthly expenses to avoid a financial crunch. Plan your finances weekly and monthly, and keep clear statements of your money. Start by listing all of your income and expenses. You can even use a budgeting tool or app to categorize your spending.
Follow The 50:30:20 Rule
Implementing the 50:30:20 rule will lead you to a more financially relaxed head state. This formula states,
50% for Needs: Rent, utilities, groceries, and other essentials.
30% for Wants: Dining out, entertainment, travel, and hobbies.
20% for Savings/Debt Repayment: Emergency fund, retirement savings, and paying off debt.
Blindly spilling your money on the things you don’t need can empty your pockets sooner than you imagine! While using the 50:30:20 rule, you can allocate your money wisely. Additionally, it makes your life both financially and mentally relaxed.
The 28/36 Debt Rule
The 28/36 rule helps you manage debt without losing control (also without losing your brain!). When you borrow without planning your finances, you end up being trapped in debts that do not allow you to live peacefully and use the money for relaxation.
28% of your Gross Income: Keep your debt within the limits that can be easily managed using the 28/36 rule. Do not borrow more than 28% of your gross income.
36% of your Gross Income: Your total debt payments should not exceed 36% of your gross income.
Reducing The Debts
Debts often give us significant stress for a significant period of time. Hence, paying your debt on priority makes you feel more financially responsible and helps you maintain your credit score as well. When you owe multiple debts, you can choose to pay high-interest debt first to reduce the load from your monthly budget. Another way to reduce the debt stress is to pay off your smaller loans first to feel the financial freedom coming your way!
Pro Tip: Pay more than the minimum required to reduce your debt faster and save on interest.
Track Your Money
Track your daily, weekly, and monthly expenses for better financial management. You can use a spreadsheet, notion, or any other money-tracking tool you are comfortable with. Consider having a look at your expenses sometimes a week. It would look like a time-consuming task at first, but gradually, you will master this skill. Not knowing where your money goes makes it easy to make impulsive buyings. Eventually, at the end of the month, you wonder where your money went! Tracking your money would help you manage your daily expenses mindfully!
It is definitely worth taking some days to make these financial habits settle in your brain. Small and consistent changes in your day-to-day financial habits will lead you to your next and next and next milestones!
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Start your journey towards your next milestone today!
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