In a credit card world where it’s easy to spend more than one could afford, a money budgeting system is necessary to prevent waste and stay afloat in the long run. Knowing where funds are going will help a person spend more wisely and save.
Record Everything
Keep all receipts, record them on a simple Excel sheet and calculate the balance every month. There isn't always a need for expensive or complicated software. It is also very helpful to keep track of expenses according to each category, e.g. rent, transportation and associated expenses, by recording each receipt under the appropriate section. Knowing where every dollar is being spent keeps a person conscientious and more careful when buying on impulse.
Don’t Fall Into the “Cheap” Trap
A person should only purchase a cheap item if it is something that will be definitely used, particularly in the immediate future. Otherwise the new item will most likely end up as clutter or something that just collects dust until the person happens to find it during the next move out or when spring cleaning rolls around.
Be Organized and Put Things Back in Place
Being organized makes a person buy less because duplicate purchases don’t occur. A misplaced pair of scissors can force a person to buy another pair, only to have that one lost again because of disorganization and untidiness. When the person knows where things are placed, it will prevent waste and help save money.
Allocate Spending Using the Income Percentage Method
Set aside a percentage of net income for each major expense, and if there is a leftover, put it into savings.
- Rent/Mortgage- 30%
- Food- 15%
- Entertainment- 5%
- Shopping- 6%
- Transportation- 10%
- Phone- no more than 3%
- Miscellaneous (subscriptions, gifts, tithes)- 11%
- Savings- 10% or more if possible
- Emergency- 10%
Percentage points can be revised a couple points higher or lower according to what the person considers more important, but it’s essential to make sure it all amounts to 100 percent and no more. If shopping is a weakness and it goes over the percentage mark, deduct it from the future months’ budget. Though more rare, a person can also be too frugal. It’s always good to be balanced because money is also a gift and it should be used to enjoy what life has to offer.
Nevertheless, wise money budgeting and management require a bit of discipline, but it’s well worth it. It not only prevents negative balances in checking accounts that incur high fees, but it also helps prepare for future unknown emergencies.
 |
