How to finance. Tips and tricks for better money management
With being the second year into the pandemic, we all are facing many challenges on a daily basis. One of those big issues is personal finance. Job losses, insecurity in the future and changing economical situations are all a part of what creates this financial planning difficulty. And while we hope for the pandemic to end (if we hope hard enough and do our part, maybe it soon will), here are a couple notes and tips on how to manage your finances.
1. Track your spending
Before you even start thinking about making a budget for yourself it is important to find out where your money goes to at the moment. Write down all the spendings (and we mean even a 1RM spending) and the category they went to.
At the end of the month go through the list and see where you could maybe cut down (let’s be honest, you could go easily without getting a Starbucks coffee 4 times a week or any other useless spending that you didn’t even notice).
2. Create a motivation
Why would you like to have some money saved? Do you want an emergency fund to cover for unpredictable situations? Or do you want to travel to a beautiful place once the restrictions are lifted? Or maybe you want to save for your children’s university or your retirement fund? Whatever it is, know your reason and it will be easier to keep motivated.
3. Try a saving scheme
There are so many different saving plans and schemes on the internet and in literature. Here you have to find what’s right for you. Here are a couple that are the most popular (and quite convenient):
– 1/10th rule: save at least 10% of your income and spend the rest as you please
– 50/30/20 rule: use 50% of your income for necessities (e.g. groceries, bills, car maintenance), 30% for your wants (we all need a little treat every now and then) and 20% for your savings
– 70/20/10 rule: 70% of your income is your monthly budget, 20% is the savings and 10% goes to debts (if you have such)
The bottom line is you can tailor these rules (or any other ones really) to fit your needs, but always make space for savings. We, humans, adapt their needs to their abilities, so no matter if you allocate 1,000 Rm or 10,000 Rm a month, chances are you will spend them all. So be wise and put some money aside for future stability.
4. No-spend month challenge
Many of us guilty of wasting money on online shopping to make ourselves feel better in this situation. Challenge yourself to not buy anything at all (outside non-essentials) for the whole month. And if after the month passes and you still want to make that purchase, then go for it. However, more often than not we buy something impulsively and if not regret it later, but definitely not enjoy.
5. Shop smart
Whatever you are purchasing do it in the most efficient way. You can:
– Evaluate purchase by cost per use
– Buy in bulk but only those items that don’t expire
– Spend on who you are today not who you want to become (you don’t need those crazy kitchen appliances if you are just starting off)
Hopefully these simple tips on effective money management can help you plan, save and feel secure again.
Meanwhile, take control of your spendings, stay home and stay safe!