With the uncertainty of the economy, it is more important than ever that you are saving money and budgeting well. Since we live in a materialistic world, it can be extremely difficult to accomplish financial goals. Although managing money can be challenging, it is worth it so that you can become financially empowered. Whether you make a little or a lot, you can set relevant goals based on the reality of your financial situation. In this article, we will share a few ways that you can accomplish your savings goals.
Establish a Baseline
As you embark on a financial journey, it is important to take inventory of all of the funding that is entering and leaving your accounts on a regular basis. What does your paycheck amount to after taxes? Do you have a reliable side hustle that generates revenue? After determining the incoming cash flow, sort through the outgoing cash flow. What are your rent or mortgage payments? What other recurring bills are non-negotiable? These monthly expenses are known as your “fixed expenses.” No matter what you do, these expenses are likely to stay the same for an extended period of time.
Take the amount of your fixed expenses and subtract the sum from your overall income. What is left over? From there, you can allocate a certain amount to be used towards groceries, gas, and other miscellaneous expenses. As you determine these numbers, choose an amount that you can aim to save each month.
How to Compartmentalize Savings
As you determine how much you are able to save each month, divide the overall number into three subcategories: long-term savings, emergency savings, and investments. In the long-term savings, you can accumulate funds that can be used towards a house, car, or other remarkable expense in the future. In the emergency expense category, you will save funding that will be used towards unexpected homeowner or medical expenses. In the investment category, select a firm that can diversify your investments so that you will have a lofty amount set aside for retirement.
How Can I Stay True to My Budget?
Staying true to a budget can be difficult. If it is November 22nd and you have already surpassed your dining out budget for the month, it is not wise to go out to dinner with friends. The key to budgeting is looking at all the things you can do rather than what you cannot do.
Unfortunately, there will be times when emergency situations occur that you did not anticipate. When this happens, you have two choices:
- Use the funds that you have accumulated in your emergency savings. When you do this, you will be able to pay the total amount that you owe towards your unexpected bill.
- Apply for a small personal financing When you get a small loan, you are able to pay your bills without depleting your entire savings account. If you just began saving money in your emergency account, this option is optimal for you. If you commit to paying this bill back diligently, you can quickly return to your savings goals.
Although saving money is difficult, it is also rewarding. When you follow a budget, you can save for the things that you want the most. Beware, accumulating wealth is a slow process. By being diligent and patient, you will be able to reap the benefits of having a budget and a savings account.