What do YOU want to do?...
Money. It’s a touchy subject for many people. For some, it’s too taboo to even discuss out loud. But it’s time to get real about money and define what it means to you. Get started today by learning how to budget it, save it and take control of it so you can sleep a little easier.
There are countless books and websites about various money-related topics. This website is one of them, so keep exploring! You may also want to check out 360financialliteracy.org and Save Wisely, Spend Happily, for further information. The more you know, the more you'll feel empowered!
Know your monthly expenses
If you don't already have a budget in place, now is the time to figure out how much you need for your everyday living expenses on a monthly basis.
Learn the 50/30/20 rule
This rule of thumb says that of your monthly income 50% should go toward your fixed expenses, 30% toward lifestyle expenses such as food, clothing, entertainment and travel and 20% toward savings and debt reduction. Run the numbers to determine what your financial picture should look like. Remember, you can spend less than this, and it’s encouraged, just make sure you’re not spending more.
Throughout the course of this year...
Be honest about the areas where you're spending more than you thought
Most people find their weaknesses to be dining out, entertainment or clothing. Many also find that the expenses that are squeezing them are things they should be planning ahead for, such as holidays, weddings and other gift-giving and travel-heavy occasions. These are the areas where you should cut back or better plan for.
Determine an amount to start saving
Figure out how much you can afford to set aside, with the 20 percent rule as an ultimate goal amount.
Know where your money is actually going
Take a look at your last three months of spending and categorize where every penny went. You can't cut back on spending if you don't know where your money’s going. Compare this to your 50/30/20 calculation and see how you measure up.
Look for ways to better align your spending with the 50/30/20 rule
If your spending and saving amounts are way out of line with the calculation, start looking for ways to shift where your money is going to better align you with the guideline. Again, it’s perfectly ok of you are spending less and saving more than these guidelines.
Set limits on trouble areas
If you find you're spending way more than you're comfortable admitting on something like shopping or dining out, then pick an amount that seems reasonable and start tracking that area on a daily basis. Once you reach your monthly spending limit in that area, you must stop spending until the next month. Tough love is often the best approach.
Set up automatic savings transfers
Don't wait to see if there is money “left over” each month, treat saving as another bill to make sure it happens.
Throughout the years...
Keep reviewing where you're spending
As life changes, so will the things you want and need to buy. Make sure you don't replace one bad spending habit with another and keep living within your means.
Use windfalls to increase your payoff
Instead of spending your tax refund or other unexpected cash put at least some of the money into your savings.