Everyone wants to enjoy the finer things in life, but most of those things come at a price. The trick is to find a balance between enjoying today without sacrificing tomorrow. That’s why it’s so crucial to develop and maintain healthy financial habits that will help you achieve your financial goals. Thankfully, a few simple tips can help you budget your money and save for the future.
Rather than keeping all of your money in an extremely liquid current account, which makes it easy to spend, consider having a fixed deposit account as a savings account. The fixed deposit account is offered by banks which provides a higher rate of interest than a regular savings account. It’s an easy way to set money aside for a rainy day so you won’t have to rely on credit cards or tap into your liquid funds to address an unforeseen expense.
It’s difficult to improve your finances if you don’t know where your money is going in the first place. That’s why budgeting is so essential for establishing financial stability. Begin by tracking what you spend your money on over a month or so. Once you sit down with that spending data, you’ll inevitably see items that you can easily eliminate without much sacrifice.
For instance, going out for lunch or buying a pricey cup of coffee every day might not seem like a large expenditure in the short-term, but can add up over the long-term. By simply bringing food to work with you or avoiding the coffee house, you will free up money that you can devote towards your fixed deposits, paying down credit cards, or investing for your future.
Once you understand your spending habits better, you can develop a budget that provides strict spending parameters that you should stay within. Give yourself an allowance for entertainment and restaurants, as well as clothing and other nonessential items. Also, establish spending limits for grocery shopping and other areas that, while you can’t eliminate altogether, you can certainly control the amount you spend.
Healthy finances depend on a certain amount of self-control. Establishing your budget starts with knowing how and where your money is being spent. In other words, setting a budget is easy but sticking to it is the hard part.
That’s why many people find it helpful to follow a simple financial formula like the 50:30:20 rule. This formula is a straightforward way to allocate your income between essentials, leisure, and building your future
50% for Needs
To get started, take your income and set 50% aside for absolute needs and essentials like rent, utility bills, groceries, and other necessities. If half of your income isn’t enough to cover these areas, then it’s time to revisit your budget and see where you can cut down on certain bills.
30% for Wants
From there, use 30% of your income for wants. This includes entertainment, eating at restaurants, shopping for clothes, and other nonessential items.
20% for Savings and Investing
The remaining 20% is for your future which consist of your savings, paying debt, and investing in your financial goals.