Let’s be real here – most financial issues arise because we lack money management skills. It’s even worse when we deny it and put the blame on the world economy. Unsurprisingly with a good budget you can keep financial problems 100 miles away from your life, metaphorically speaking, of course. But trust me, budgeting really works, and it can literally save your fortune and make you richer than you can even think of…
Unfortunately, the problem is that we are never taught “financial management” since childhood. so we naturally don’t know how to manage money. Hence, in this post I’ll list down the 10 best budgeting ideas that actually works. And it doesn’t matter whether you income is high or on the lower side. These 10 money management techniques are a system that works on all situations…
Ready? Let’s goooo….
(1) Review Budget Regularly
I suppose you have already created a budget? If not, no need to fret. Take some time out and focus on the things you spend on. be as intricate as possible. The more detailed the list is, the better it’ll be for you to make a solid budget.
Well, if you’re the ones who already have the budgeting habit, then congratulations! You’re better at money management than a lot of people. Now, the next step for you is to review your budget. A regular refresh is necessary. Why? So that you can assess the situation whether your budgeting is working for you or against you. That’s why – Review Your Budget.
Let’s say you created a budget in January. When the month is over, look at your present financial situation and see whether January was good month, financially. If you feel that it was a perfect budget, then let it be just the way it is. At least for few months. Remember: When things work fine, try to keep it that way. You might have observed this many times with companies who destroy a lovely product in the name of “upgrade.“ Don’t be like that.
On the flip side, if you see that you can improve a bit, then go for it. Make changes in your budget. Keep this habit of reviewing your budget even month. It’ll help you a lot in the long run.
(2) Expense Tracking
You wouldn’t need a budget if you had no expense. That’s why closely tracking your expenses if absolutely necessary. Doesn’t matter whether you’re a frugal spender, or have a bad impulsive habit, keep track of your expense. Those time are gone when you had to keep a notepad to keep track of all your expenses. Just download a budgeting app and you’re good to go.
And, please don’t fall into the so-called spenders-anxiety trap. Do whatever you can, but you’ll have to spend money to buy necessary things. You should also spend some money on leisure. The real issue arise when you start spending out of your pocket.
Also, keeping a detailed expense list helps you at the end of the month while reviewing your budget. You won’t have to recall the $10 ice cream you spent on a Saturday evening. It’s just there in your budgeting app. Trust me, if you keep using a budgeting app to track your expense, within few months, you’ll develop a good financial intuition. Then you won’t have to use any budgeting app to stop you from overspending.
(3) Embrace Frugal Lifestyle
Yes, frugal living. While many people love living a frugal lifestyle, but it’s not everyone’s cup of tea. It’s actually quite hard to live frugally. Remember: It’s easy to accumulate things. Getting rid of them is hard. Living a frugal lifestyle is all about getting rid of the unnecessary things from your life and living with only the things you really need.
A frugal lifestyle is all about spending on important stuff. It seems easy until you try it for yourself. To know what to buy and what not to, you’ll need to have huge self-control. If you want to live frugally, better take baby steps before going all out. Start with removing clutter from your work/study desk. Then, remove clutter from your room… you get it.
The Japanese are good at living life frugally. Search for Konmari Method. It’s a great method you can apply in your life. Do let me know your experience after using the Konmari Method.
(4) Make Emergency Fund
Nobody likes an emergency. But it can rain hell anytime. It can come in the form of a health emergency, or financial emergency. The best you can do is to keep yourself ready. That’s where an emergency fund comes in. And emergency fund is like the last layer of defense before anything bad happens. The stronger it is, the more you’re protected from any adverse situations.
The good part is that it’s actually easy to create an emergency fund! Keep aside a portion of your monthly income into your emergency fund. You have to treat the money as an emergency fund. You cannot use the money for vacation or buying your favorite car. The money should only be used to save you from a crisis.
What’s a good financial emergency fund? If you can survive for more than six months without any income source, then it’s a great emergency fund. For example, if you make $7k every month, then a great emergency fund would be $42k. You won’t believe how many people have survived a financial recession because of their emergency fund. Rich people know this better than anyone. They often call it risk management. But the truth is that they are just trying to keep themselves safe from going complete broke.
(5) Automate Savings & Investment
Now that you’ve started saving a portion of your monthly money into your emergency fund, it’s also time to save money for leisure and life after retirement. What’s the need to work hard so much when you don’t even spend a dime on vacation? I have seen several people (including myself) who get burnt out for working too much and taking too little break.
Invest in the best mutual funds and high-yield bonds. You don’t have to start investing only when you make $1 Million. You can rather take out some money out of your monthly salary and invest. Stay away from short-term money. There’s too much risk, and high chances of failure. You can use Robinhood app or any other investing app you love to. The earlier in life you start investing, the more money you’ll have later in your life. You can even retire early if you make some intelligent investment decisions.
YOU NEED TO RELAX! You can force yourself to work hard and complete your task before the schedule. Good for you. But you should also need to take care of your mental and physical health. Keeping aside all the scientific studies about productivity, feel for yourself. Don’t you feel relaxed after going on a vacation or just on a simple walk? Taking a time out of your regular working schedule increases your productivity and convinces your brain to work harder for the next vacation. A vacation better than before.
(6) Make a Realistic Budget
Coming back to budgeting once more, I forgot to mention one thing while explaining the benefits of budgeting: Realistic Budgeting. One mistake that many people make while making a budget is that they get swept away in emotion and make an unrealistic budget. Like “spending not a dime more than $500 in a month.” You know it’s almost impossible to spend that low in this BS economy. Such unrealistic budgeting is going to be even worse when you have a high-spending habit.
Remember – the goal of budgeting is not to starve yourself and make money out of your sweat, it’s to create a perfect balance between saving and spending money. Please keep this in mind. You should not torture yourself mentally when you spend something accidentally. Mistakes do happen in the beginning. Learn from it, and make sure you don’t repeat it next time.
Cutting cost is nice, but there’s a limit to everything. You cannot expect to bring your expenses to zero and savings to hundred. Even if you decide to drink only water for a month (hypothetically speaking) you’d still have to pay taxes on it. So yea, the Government has made sure your expenses never touches zero.
(7) Sell Unused Items
What’s better than saving money and spending less? Making more money! Even if it’s just a little. Sometimes you can get real joy out of small things, selling unnecessary things and making money out of it is one of them. When you start decluttering your home, you’ll be left with a huge pile of disposable things. You can either treat them as garbage and just throw them, or you can selling them for a chump-change.
But sometimes, you really can make a lot of money selling items you don’t need no more. You might have a sound system that you don’t use now, but someone might need it desperately. You can sell it to the them and make money out of it.
In fact, buying used item is a multi-billion dollar industry. For clothes, it’s called a thrift store. You can sell your used clothes to thrift stores and make good enough money from it.
(8) Resist Impulsive Buying
Impulsive buying is at the roots of an imbalanced money management. You might think: I’m ain’t no impulsive? Yeah, you can say this while staying at home, but you will surely feel this when you visit a shopping mall. If you feel an intense urge of buying things (that you might not need) and justifying the expense, you can be almost 100% sure that you have an impulsive buying habit.
Of course, it’s a bad habit, but the good thing is that you now know that you have something to work upon. You know it pretty well that if you don’t resist and let go off this bad money habits, it’s going to create financial problems in the future.
As it’s for all habits, start slowly. You don’t have to go overboard and force yourself to stop impulsive spending. Forcing it will only make it worse. Rather, set aside a small budget for those impulsive spends. Convince yourself to not spend out of the impulsive budget. The first month is going to be painful, I can vouch for it. But, if you can fight it, next time it’ll be so much easier.
Now, keep on decreasing the budget every month. so, if it was $300 this month, the next month make it $250. The difference is only $50, but within six months the impulsive spending will drop to zero. I have tried this technique several times, and it has done wonders. Try it for yourself and do let me know whether it actually helped you.
(9) Stop Credit Card Use
Credit card is sure a lifesaver, but this lifesaver can quickly become the biggest mistake of your life if you don’t know how to manage it. No, I’m not trying to diss credit card, but the way most people handle it. It’s tricky!
And you know what is the worst combination? An impulsive spender with a credit card. In the worst cases people have lost their life savings to complete their pending credit card bill. Stop credit card usage. Either switch to a Debit card or, the best of all, cash. Hard cash is the fastest way to gauge how much you’re spending. You can fell that your wallet is getting empty if you overspend.
This techniques seems silly, but try for yourself and you’ll immediately feel a difference while you start spending.
(10) Stop Expensive Subscriptions
Honestly, you have to accept this too: Subscriptions have become a joke now. Only a handful of them are actually good, and most of them think they have become too powerful to fall. While the quality goes down the prices go up. If you too think the same way, it’s time you let the services go.
It’s not a problem if you have one or two subscriptions, but if you have a handful of them, I guess it’s time you review your decision and decide whether you should keep spending money on them. Of course, prices are low, but if you have a lot of subscriptions, then you’ll easily be spending upwards of $100s of dollars every month.
So, if you’re pushed against a wall for money, sail the seas and unsubscribe from the least used subscriptions. I may sound rude, but it really works!