Fortunately, there is a method to manage our money in the most practical and simple way. Here we tell you.
Many people do not like to analyze, plan or write down the expenses that they make with their money. However, not giving it a route, entails consequences that we are sure, you would not want to regret. You dream of having financial stability, but it becomes a great challenge without good money management.
In this article you will be able to learn about habits that, if applied, you will see that, over time, your money will yield more and your financial life will be much healthier, even without having a very high budget. Are you ready to know the easiest way you can apply?
Now you know:
- Not managing your money correctly could lead to big problems.
- It is not necessary to have a very high budget to start managing your money.
- Apply these habits to start managing your money better.
Know your financial situation and your spending habits
Before you know the best method to manage your money, you must know your monthly spending habits. This will help you budget for the future and give you a firm foundation about your current situation.
Most common expenses that you can find in a standard budget:
- Debts
- Entertainment
- Feeding
- Home
- Transport
- Public services (internet, cell phone, electricity, water, etc.)
- Medical attention
- Clothes
Set specific savings goals
It is advisable not to save too much at first. Set goals and amounts that are easily achievable in the first month and then increase the amount the following month until you achieve your stated goals.
Along the same lines, we will give you 5 financial habits in order to achieve better management of your money.
5 habits to better manage your money
Avoid excessive expenses
Identify which purchases are unnecessary in this way your budget will not be affected and you will be able to make ends meet. Make money management a habit now.
Simplify your money
To manage your money in the best way, you should use fewer means of payment. This means defining whether you pay with cash or a credit or debit card.
Pay your bills at the end of each month
Paying your bills at the end of the month is an easy way to manage your money, since by doing so you gain great benefits such as building a good credit history, as well as avoiding overspending on late fees.
Create an emergency fund
One of your priorities is to create an emergency fund for any unforeseen event that may arise and affect your pocket. They do not matter if you start with a smaller amount, the idea is that you can create a financial cushion that you can use in case of eventualities. In the best of cases, a fund can cover you for up to 4 months if you run out of money.
Keep informed of how much money you have
Although it may seem unusual, most people do not know how much money they have. Consequently, they forget to pay bills, in order to solve this, determine your disposable income (net amount without taxes or deductions) month by month.
The best method to manage your money
So, with these already created habits, you can apply the 50 – 30 – 20 rule, it is the easiest way to put together a budget, since it categorizes your needs, expenses and savings effectively. It is about dividing your expenses into 50%, 30% and 20%.
It is important to keep in mind that the money that you will distribute in percentage (50%, 30% and 20%) must come from your net income. That is, this exercise must be done after paying your taxes.
How is this rule applied?
To make it easy for you you can arrange it within a circle and divide it as follows:
With the graph ready, distribute the percentages as we present below:
The largest part will be for basic expenses (50%)
- housing expenses
- Daily food expenses
- health expenses
- Public service expenses (water, electricity, telephone)
- Minimum debt payment expense
The median part to pay personal expenses (30%)
- clothing expenses
- Expenses for the purchase of electronics (change of cell phone, stereo, etc.)
- Fun Expenses
- vacation expenses
And the smallest part is for savings (20%)
- Safety fund (covering 6 to 12 months of expenses)
- Saving
- Investments
20% will help you to be in a better economic position compared to the rest. If you assign a higher percentage to this space, your financial situation will be enhanced.
By distributing your money, you will be able to calculate the percentages that correspond to you to spend on a monthly basis. There is no need to do the bookkeeping and record it, you will just have to stick to the calculated percentages. Follow them to the letter.
Frequent questions
How to understand the 50-30-20 rule?
This rule has as a priority helping you allocate your money to needs, wants and savings. Also, it gives you a scope of where you might need to reduce your expenses.
How to manage my money if I earn little?
Write down your fixed expenses and separate at least 10% of your income, this will be the amount with which you will start. Always keep your expenses separate. Lastly, set financial goals.
Conclusion
The 50 – 30 – 20 rule is a method that will allow you to better manage your money and gives you the facility to distribute it in the most convenient way. If for now you can’t apply the rule with the distributions as we pointed out, then set yourself the goal of eventually reaching it. As you will see, it will distinguish your needs optimally.
