Although getting a loan is now easier than ever, the world we live in is also getting increasingly more demanding when it comes to how much money we spend. This can make it difficult for some people to manage their personal finances.
The truth is that balancing one’s monthly income and expenses is never easy, regardless of how much money one makes. Even those who have high income often have high expenses that they have to figure out how to manage from one month to another. Furthermore, aside from the regular monthly payments such as rent, utility bills, groceries and others, urgent expenses may appear, such as medical treatments or procedures. This can make managing one’s personal finances a very complex and difficult process.
However, three steps can make the process easier, regardless of its scale. The tips below will work for individuals who are earning £2,500 per month as they will for those who make £25,000 per month.
Constantly Analyse Your Expenses
The first step towards properly budgeting your income is analysing how you spend your money. Use your smartphone to create a list where you can keep track of all your expenses. For the best results, you should include everything from rent to the Netflix subscription and snacks that you buy in your lunch break.
Gather this information for one or two months and then go over it and establish how much money you are spending on essential products and services, how much is you pay for inessential items, and how much is wasted. This data will help you get a better idea of where you should cut back on how much you spend.
Create a Rigid Monthly Budget
The next step is to sit down at the end of a month, look at the data you’ve collected and created a rigid monthly budget that will help guide the way you spend money over the coming month. Note that once you set this budget, you will have to make sure that you do not spend anything more than what you’ve planned to.
After one month, you will be able to make changes. However, you should never go overbudget once it has been set. This will teach you discipline when it comes to how you spend your income and will also help you save a lot of money.
Set a Miscellaneous Expense Limit
One of the main issues that many people are facing is not knowing when it is acceptable to treat themselves and when they should abstain from buying things that they do not need. The solution is fairly simple: Set a percentage of your monthly income that you can use for miscellaneous expenses.
For example, if you are earning £2,000 per month, of which your regular expenses are £1,300, that leaves you with £700. The best way to manage this amount of money is to put half of it in a savings account and spend the other half as you see fit. However, some individuals prefer to deposit all the money that is left in the savings account, and only start spending after the amount in the account reaches the equivalent of 2 monthly wages.
Discipline Is Essential for a Healthy Financial Life
These three steps are all that you will ever need to properly manage your expenses. You simply need to focus on what is vital to your wellbeing and put most if not all the money that remains, into a savings account. Although you won’t be rewarded in the short term, after a few months, you will be able to make larger purchases without going into debt.