How to Manage Your Money Wisely
Make a list of your guaranteed monthly income., Track all of your expenses each month., Break your expenses down into fixed, essential, and non-essential., Keep these records every single month., Calculate how much money you have left over after...
Step-by-Step Guide
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Step 1: Make a list of your guaranteed monthly income.
Calculate all of your income on a monthly basis.
Do not include any income you hope to get from overtime, tips, bonuses or anything else that is not guaranteed.
Only use income that you know, without a doubt, will be earned that month.
This gives you a clear picture of how much money you have to spend each month, allowing you to draft an accurate budget.
Any additional money (tips, bonuses, etc.) should be considered "extra." By planning for only your guaranteed income you ensure that you will have enough money to cover living expenses should anything happen.
It also leads to the happy "surprise" of extra money when it comes. -
Step 2: Track all of your expenses each month.
Keep all of your receipts to get an accurate picture of your spending habits.
Luckily, modern technology has made this easier than ever, as you can log-in online to see you bank and credit card activity.
Most banks even break this up by type of spending as well, such as "Food/Groceries," "Gas," or "Rent." If you spend cash, keep the receipt and make a note of what you bought.
Apps like Mint, Mvelopes, HomeBudget, and more allow you to sync your credit cards, bank accounts, and investments to one place, providing graphs of your spending based on categories.This is a great way to get a view of your finances with very little work needed. , This is the best way to see where you can save money and start spending wisely.
Fixed Expenses:
These are things that do not change month to month but must be paid, including rent, car/loan payments, etc.
Essential Expenses:
These include food, transportation, and utilities
-- anything that you need to live but whose cost changes from month to month.
Non-Essential Expenses:
This is everything else, such as movie tickets, drinks with friends, and toys/hobbies.
This is the biggest place most people realize they can save money. , You cannot just do this once and expect to get a perfect budget.
The best way to see how you spend money is to keep tabs on it all the time, checking at least once a month to see how you are doing.
In general, your income will stay the same, so you will need to adjust your expenses if you feel like you are losing money.
Place your month income and expenses side-by-side in a spreadsheet.
You can also write them down in a journal or notebook.
Having these numbers next to each other lets you see how much money you have left over to spend. , If you only spent the money you needed to live, how much of your income would be left over? Take your guaranteed income and subtract the fixed and essential expenses to find out how much money you have to spend each month.
You need to have this number in order to manage your money wisely, as it is your "allowance" for savings and fun. , There are many, many schools of thought on how much money you should be saving each month, and they all have their pros and cons. 10% is the bare minimum you should be putting aside into savings.
This will quickly grow, and often will not hurt you much in the short-term.
That said, this money should also be used to pay off any debt if it is large and interest payments are big. 20% is considered a good, safe amount of savings.
This ensures that, ever 5-6 months, you end up with enough saved income to protect you for a full month if something happens to you.
It allows you to save a lot of money without drastically affecting quality of life. 30% is the goal everyone should shoot for.
This allows you to save money for retirement, big activities like vacations, and large purchases (cars, college, etc.).
It may, however, limit what you can afford in the short term. -
Step 3: Break your expenses down into fixed
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Step 4: essential
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Step 5: and non-essential.
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Step 6: Keep these records every single month.
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Step 7: Calculate how much money you have left over after fixed and essential expenses.
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Step 8: Split your remaining "allowance" into savings/investments and lifestyle activities.
Detailed Guide
Calculate all of your income on a monthly basis.
Do not include any income you hope to get from overtime, tips, bonuses or anything else that is not guaranteed.
Only use income that you know, without a doubt, will be earned that month.
This gives you a clear picture of how much money you have to spend each month, allowing you to draft an accurate budget.
Any additional money (tips, bonuses, etc.) should be considered "extra." By planning for only your guaranteed income you ensure that you will have enough money to cover living expenses should anything happen.
It also leads to the happy "surprise" of extra money when it comes.
Keep all of your receipts to get an accurate picture of your spending habits.
Luckily, modern technology has made this easier than ever, as you can log-in online to see you bank and credit card activity.
Most banks even break this up by type of spending as well, such as "Food/Groceries," "Gas," or "Rent." If you spend cash, keep the receipt and make a note of what you bought.
Apps like Mint, Mvelopes, HomeBudget, and more allow you to sync your credit cards, bank accounts, and investments to one place, providing graphs of your spending based on categories.This is a great way to get a view of your finances with very little work needed. , This is the best way to see where you can save money and start spending wisely.
Fixed Expenses:
These are things that do not change month to month but must be paid, including rent, car/loan payments, etc.
Essential Expenses:
These include food, transportation, and utilities
-- anything that you need to live but whose cost changes from month to month.
Non-Essential Expenses:
This is everything else, such as movie tickets, drinks with friends, and toys/hobbies.
This is the biggest place most people realize they can save money. , You cannot just do this once and expect to get a perfect budget.
The best way to see how you spend money is to keep tabs on it all the time, checking at least once a month to see how you are doing.
In general, your income will stay the same, so you will need to adjust your expenses if you feel like you are losing money.
Place your month income and expenses side-by-side in a spreadsheet.
You can also write them down in a journal or notebook.
Having these numbers next to each other lets you see how much money you have left over to spend. , If you only spent the money you needed to live, how much of your income would be left over? Take your guaranteed income and subtract the fixed and essential expenses to find out how much money you have to spend each month.
You need to have this number in order to manage your money wisely, as it is your "allowance" for savings and fun. , There are many, many schools of thought on how much money you should be saving each month, and they all have their pros and cons. 10% is the bare minimum you should be putting aside into savings.
This will quickly grow, and often will not hurt you much in the short-term.
That said, this money should also be used to pay off any debt if it is large and interest payments are big. 20% is considered a good, safe amount of savings.
This ensures that, ever 5-6 months, you end up with enough saved income to protect you for a full month if something happens to you.
It allows you to save a lot of money without drastically affecting quality of life. 30% is the goal everyone should shoot for.
This allows you to save money for retirement, big activities like vacations, and large purchases (cars, college, etc.).
It may, however, limit what you can afford in the short term.
About the Author
Donald Kelly
Experienced content creator specializing in pet care guides and tutorials.
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