The following is a guest post.
When it comes down to finances, it’s easy to be bewildered by the myriad options available for investing money. Figuring out how to save your money in the best possible way and form a budget that leaves room for you to not only pay your bills, but accomplish the things you really want to do- the things that inspire you to work so hard- is something that takes time and dedication. There are a few basic steps that you can take to make your money work for you, and they start with making the time to sit down and figure out how much you make, how much you spend and how much you need and want to save. Making a timeline of your future plans is a great way to get started.
Making a Basic Budget
Budgeting your everyday expenses may seem pretty simple, but in truth, there’s a good chance that you’re spending more money than you realize on frivolous expenditures. To begin, make a list of expenditures such as your rent or mortgage, your utility payments including electricity, water, trash and gas or other heating. Next, add other bills such as television, Internet and other digital services. Factor in and write down your transportation expenses. If you drive, this is an estimate of how much you spend on gas per month. If you use public transportation, this figure would be the amount that you spend per month on taking buses or trains. Next comes your grocery bill. Write down a reasonable estimate of what you spend monthly in food.
The sum of these figures is equal to your necessary monthly expenses. Write down the figure that you bring home monthly, and subtract your monthly expenditures from that figure. The money that is left is what is available for spending or saving. If you look at that figure and feel that it is significantly higher than what you feel is left in your account after all those expenses, you’re not alone.
Cutting Out Unnecessary Expenses
If the amount of money left after your necessary expenses seems like more than you’re usually left with, chances are good that you don’t realize how much small, frivolous purchases can add up to major expenses. Take the time to go over an itemized statement of your bank account from the past month, filing necessary expenditures in one column and entertainment, fast food or restaurant visits and other unnecessary expenses in another. Add up the amount of money that you spend on those unnecessary expenses and deduct it from the money that remains after necessary bills are paid. Like many people, you may be surprised at how much that figure shrinks.
Changing Your Lifestyle to Change Your Budget
While cutting out all fun things such as movie tickets and nights out to dinner is not reasonable, limiting the amount of funds that you spend on entertainment and takeaway food is necessary. When examining the figure you are left with after paying rent and bills, it is wise to budget that figure into three categories. One is savings, the other is emergency money on hand and the final category is money for fun things.
The wisest way to budget this money is to make sure at least 50 percent of that money goes into a savings account that accumulates interest to plan for future interests, such as buying a home. Eventually you might want to buy a house, and searching around for home loans can be tough. Just remember to be frugal with your investing and get a good deal on a loan. Calculate your mortgage repayments before you start, by using online mortgage calculators. You can even find investment property calculators on sites like Smartline. It is up to you to determine how you feel the remaining money should be divided, but in the interest of practicality, 30 per cent of the money being reserved for unexpected financial needs and 20 per cent being used as an entertainment budget is the safest way to go.
Yes, this will mean cutting back on buying lunch at work, but buy reasonably priced things you like at the grocer and pack a lunch. Movies four times a month may be a thing of the past, but an inexpensive streaming movie service can provide just as much entertainment. By finding ways to cut corners, you can make your budget go much further, develop smart financial habits and build a nest egg for your future.