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The Ultimate Beginner’s Guide To Budgeting And Saving

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Do you have financial problems and you are not saving much, then you should read this The Ultimate Beginner’s Guide To Budgeting And Saving. After reading this, you will be able to declutter your life and save fortune for your future.

Some people desire to save, but only a few can commit themselves to it. People give many excuses for not saving, like Jon, who’s a businessman with three kids. And in his case, you can’t blame him because life isn’t fair, right? His licking roof needs a repair, the doorknob that was broken by his kids needs replacement, his bills keep lining up every now and then waiting for a settlement, his mother is sick and in the hospital, his car isn’t sounding so good, and the tires need to be changed, and what about the groceries? Man has got to eat, right? Jon wished his salary was more so that he could save, but he still complained about not having enough even after the increment. So, why is Jon having a problem with saving? Is it the money? No! Jon’s problem is ignorance about how to save and erratic spending. But at some point, he began to read books about managing money and saving. He also listened to audios about savings and attended seminars. Through these experiences, Jon began to understand that he could still save and live despite all his excuses.

Are you like Jon, having so many expenses to deal with? Do you detest the saving idea because you don’t have enough? Then I’ll suggest you read through this post, and then hopefully, you’ll decide.

Understand Your Financial Position

You need to understand yourself; who you are, what you are and where you are. You don’t have to agree with the state of affairs. You just need to understand them, because if you don’t, you wouldn’t be able to change anything. Change begins when we start to understand our position.

Theodore Roosevelt once said, “Do what you can with what you have, where you are.” You might not be satisfied with your earnings, but understanding that position gives you the power to work towards change. And when Jon began to understand his position. It didn’t bother him when his friend bought a new car, or when his colleague bought a new pair of shoes and a black tuxedo, or when his brother-in-law rented an exquisite apartment. As far as he was concerned, they weren’t him, and he wasn’t them. When it comes to topics such as this, my mother would often quote Martin H. Manser, who said, “No one knows where the shoe pinches, but he who wears it.” If you know where the shoe is pinching you, you should be wiser in your money choices.

Set Yourself On A Budget Plan

Differentiate What You Want From What You Need.

Have you ever kept a record of your grocery expenses for a month? If you haven’t, then you should try it. I bet you would be shocked at the amount of money you spend on food. And don’t get me wrong, I’m not saying you shouldn’t buy good food just because you’re saving. I’m telling you should endeavour to draw the lines between what you want and what you need. You shouldn’t spend more than you earn. Saving would become an impossible mission If your expenditures are always above what you earn. That’s why you must understand how things are with you so that you can plan accordingly.

In Jon’s case, he realized there were some things he wanted that he didn’t need. He knew he didn’t need to buy a new suit or to get another car, only to impress others in understanding his position. He realized if he could be patient, he could still get those things he wants, but they’ll have to wait for the time being. And if you’re serious about consistency in savings, you have to be like Jon by cutting the excesses.

I wish Jon have read this The Ultimate Beginner’s Guide To Budgeting And Saving before.

Jennifer’s debt story

When Jennifer was in college, She was one of those students who accepted more monetary support than she needed, which leads to the student loan debt.

The thing which made her situation even worse was that She suffered from low self-esteem, depression and anxiety.

Whenever She was feeling sad or depressed, She would go to the mall and buy things. To make herself feel better, She would spend money on getting her nails done, tanning salons etc.

Does this sound familiar? Like Jennifer, whenever we feel depressed, we start spending our money for shopping to make ourselves feel better. It will feel suitable for a short time. Still, before you knew it, You will be back to spending money on ridiculous items, continually needing to find satisfaction from the stupid things.

Shortly after, she graduated with a finance degree. She was in more than $100,000 debt, including her student loan, credit card and medical expenses. It was also impacting her performance at her job.

Her friend told her to create a budget, although she graduated with a finance degree, she never thought of creating a budget. The very first thing she did was write down all the expenses.

Once her budget report was ready, she realized the problem wasn’t in her low income but her useless spending. She started controlling her spendings.

All journey of start budgeting is not merely about the numbers but finding yourself. It’s a path of self-discovery. When you recognize your mind and why you spend so much on useless things, you will address the real problem that resides inside you.

Open A Saving Account

It’s obvious, right? But still very important. I don’t think there’s anyone who would want to save their money in a wooden box and then slide it under the bed. Opening a savings account specifically for this purpose is the best choice. You can set an automatic deposit from your main account to your savings or simply commit yourself to transfer a percentage at your own discretion.

Before you can decrease spending and make room to fund your savings account, you have to know your expenses. A crucial part of increasing your savings is learning the cash flow and cutting your costs.

Analyze your last month’s credit card or bank statements to get a sight of your cash flow. Alternatively, There are some expense-tracking apps to watch out for your expenses in real-time. Make an assessment. There are so many things where you will spend your money without even realizing it.

  • Eating out
  • Apparel
  • An unused gym membership
  • Buying snack at the gas station
  • video games
  • Energy Drinks
  • Unused subscriptions

Pay Yourself First By All Means 

Your best investment is yourself. There is nothing that compares to it.

Warren Buffett

Many finance experts and retirement planners promote the “pay yourself first” policy as a compelling way to guarantee you continue making your preferred savings participation every month.

If you’ve read George Clason’s Richest Man In Babylon, you will notice that this concept was often repeated. Having read this book, Jon decided that he would pay himself first before paying anybody or buying anything. So, every time he’s paid, he would transfer 10% of his earnings to the savings account, and he also applied the same to other extra cash he received.

So, If you must succeed in this mission, you must be ready to follow your budget and pay yourself first before you think of doing any other thing with your money.

Did I hear you say that your earnings aren’t enough for you to take out 10% to save? Then, let me tell you, it will never be enough. You say why? The reason is that the more money you receive, the more your wants and desires increase to match the increment, and that was why Jon couldn’t save even after he got a salary boost.

It’s advisable to go with 10% savings because it’s almost negligible. Don’t get too motivated, and throw in 30% or 50%, just make sure you’re consistent with the 10% savings irrespective of the odds that come your way. You’ll be glad you did in the nearest future.

In simple words, the goal of paying yourself first is to help make sure your future is safe, which includes building up contributing to retirement, an emergency fund and saving for any other long-term goals.

Make a List of Your Income Sources

If you are doing a business or job, then you should heed this step. First of all, make a list of all your household profits/wages (including your wife and yours).

After that, note the total assets in your budget sheet and deduct your fixed, regular and variable payments from the sums. That’s how you will figure out your expenses and savings. Once you sort out your costs, you can plan how much fund you want to designate on selected things. Some examples of your expenses are

  • Mortgage/Rent, insurance, dues and repairs
  • Water, heat, electricity, and garbage
  • Emergency fund, vacation fund, and retirement funds
  • Car payment, car insurance, gas, and repairs
  • Medical Expenses
  • Credit cards
  • Personal life expenses like books, internet, phone
  • Your Blog

The 50/30/20 method

What Is the 50/30/20 method?

The 50/30/20method is a set of straightforward guidelines for how to design your budget. Using them, you allocate your cash to the following sections.

50% to Needs

These are essential needs of your life like:

  • Mortgage/Rent
  • Food/Groceries
  • Garbage, electricity, water, and sewer

30% to Desires 

This category includes the expenses which you don’t need but desire:

  • Vacations
  • Hobbies
  • Eating out
  • Netflix and Hulu

20% to Financial Goals

This category covers your savings and debt payments:

  • Retirement contributions
  • Saving for a house
  • Savings Accounts
  • Debt payments

For example, say you earn $2,500 monthly. You’ll want to spend no more than $1,250 on needs and $750 on desires, leaving $500 for savings and debt payments. If you’re going to save more, you’ll limit your desires to $500 per month and put the extra $250 toward your savings fund instead.

These are just guidelines for planning your funds. It would help if you used the budget tracker to track your expenses.

Zero-based budgeting

In this way, you’ll assign a function to each dollar you earn. That means you’ll create more categories than the three used in the 50/30/20 rule.

For example, you might use “eating out,” “self-care,” and “clothing.” If you earn $3,500 per month, you’ll make a list of all your savings goals, expenses and debts. You will ensure that you utilize your complete $3,500. This method is most suitable for people who won’t feel overwhelmed by the record-keeping required and whose income is relatively stable month to month.

Envelope system

In this option, you should set aside funds for each of your categories in cash – in envelopes labelled for each expense – which limits your spending to the amount you’ve identified. It requires a high organization level and isn’t always realistic if you pay specific bills online or by credit card.

Multiple Account budget

You can also use your bank account to do the budgeting for you. It means creating multiple accounts, which is individually comfortable at online banks and giving them jobs, similar to the sections in the 50/30/20 rule. One account could be for obligations, like housing payments and utility bills; another account for savings; and another for entertainment. You’ll set up regular transfers from your primary checking account to your other accounts so you can save and budget without pondering about it.

Write down your financial aims

With motivation saving money is a piece of cake. Take a few sticky notes and write down the financial goals you’re hoping to approach. Maybe you want to retire in the early 40s.

The best way to sustain motivation and constant improvement toward your savings goal is to memorize why you’re saving in the first place.

Examples of the financial goals might be

  • Living a more decluttered and minimalist lifestyle
  • Start a side hustle and earn some extra cash
  • Earn million dollars by the age of 40
  • Making more money from your business

Declutter’s impact in saving

Do you have anything in your home or garage that doesn’t give you joy when you see it? Or is there anything that’s of no use to the home? Then maybe you should consider selling it and saving more. And more so, you get to declutter your house of non-essentials that occupy useful space.

concentrated woman carrying stack of cardboard boxes for relocation
Photo by Andrea Piacquadio on Pexels.com

As for Jon, he was able to save enough money, which enabled him to start investing in real estate, and years later, he was able to buy all the things he wanted and save even more for further investment.

So, what do you say? Are you ready to start saving, or are you still thinking about why it won’t work instead of thinking about why and how it will? The choice is yours, but I’ll suggest you follow Jon’s steps, the earlier, the better.

Conclusion

These are the easy and effective guides that will encourage you to change your monetary life. If you want to uplift your life and gain financial freedom to do your desired thing, try out the steps discussed above. I hope this The Ultimate Beginner’s Guide To Budgeting And Saving will have a positive impact in your life.

Key Takeaways

  • You can’t win this battle without making a budget plan
  • Your goal should be to ensure that enough salary is first stored or invested before monthly payments are made
  • Cut your expenditures and redirect them toward your savings account
  • You need a budget plan to track where your cash flow is going, with specific goals dedicated toward long and short-term savings goals
  • The 50/30/20 method is a guideline for allotting your budget, respectively: 50% to “needs,” 30% to “wants,” and 20% to your financial goals
  • When managing your money, it helps to note down your monetary goals. Financial goals are the milestones that you want your funds to cover at a specific time

So, start budgeting from today and live your dream life in the future.

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