Everything a Beginner Needs to Know about Budgeting and to save Money
“In fact, what determines your wealth is not how much you make but how much you keep of what you make”
– David Bach
As per David Bach, author of Smart Women Finish Rich: 9 Steps to achieving financial security and funding your dreams, it does not matter how much you earn money if you do not even know how to save it. Despite earning a good sum of money, if you are unable to save money, you have nothing. When I was young, my elders used to advise me, “You will have to work hard and plan everything when you are young so that you can have a better future in old age ”I think we all had been hearing the same repeated financial advice. We might understand its importance, but there are times when we fail to follow the advice diligently.
The right bank balance ensures that we will have enough to survive during the hard times of our life. You do not need a lot of money to get started with your savings. The biggest problem that people have when it comes down to their money is not knowing exactly how to save money. Your consumption will rise with the income you are earning, so it is necessary that you consider making an appropriate spending plan. A smart money budget is probably the best way to allocate your sources. You can start by dividing your money into three parts:
- Short-term financial goals
The short-term financial goal involves a specific proportion of your income that you have set aside for treats like an iPhone, expensive watch, motorcycle, a Chanel bag, or a luxury bag.
- Long-term financial goals
This implies a minimum of 20% of income set aside for improving your net worth, like buying assets; examples of good purchases will be buying land/property, gold, or shares in a market, etc.
- Living expenses
This involves your monthly contribution like your health insurance, rent, bills for electricity, phone, petrol, etc.
Currently, financial management is an essential part of existence.
With more time passing, it might feel like the expense rate is getting high, and you hardly have any money to save. But if you concentrate on making a suitable budget, all your financial problems can be easily recovered.
Tips to Manage your Budget and Save Money
Trimming your spending may seem like a sacrifice to you. But it will be worth it in your future. We will discuss 10 best ways to adjust your daily habit so that you can cut monthly bills, which will help you make long-term changes.
- Use an automated tool for budgeting
If you are a busy person who hardly has time to work out on savings, using Qapital and digit might help you transfer small amounts to a separate savings account from a checking account. We have done some research to recommend to you some of the best apps.
- Choose the right bank account to maximise your interest
You need to switch your bank account if you are not satisfied with the current interest rate. You must research and stay updated about the best bank offers available. There are banks that not only offer sign-up bonuses for setting up direct deposit or for opening an account, but they also come with attractive interest rates. It is true that interest rates are not what they used to be, but you must still take a look at them. Spend more time learning all the best savings account that is available online.
- Prep up before going grocery shopping
Preparing yourself before you go to the grocery store will help you in the long run. It is probably the best practice for saving money. Make sure you stick to the list. Before you step out, check the pantry and create a proper grocery list. You can also utilize the coupons and loyalty programs to maximize your savings.
- Restrict yourself from impulse buying
You do not need to buy things to make yourself feel better. There are days when we find ourselves most impulsive, like heartbreak or a stressful day at work.
Here are a few things you can try to de-stress yourself:
- Do exercise or meditation
- Go for walking or running
- Change the environment
- Meet your friends
- Immerse in a creative outlet
- Cancel unused club memberships
It is time to cancel the club memberships that you never use. There is no point in unnecessarily paying dues to the clubs you do not use.
- Prepare your own meals
Try making your own meals as much as possible. It will be way healthier and cheaper than ordering food from outside or dining out.
- Consider a fuel-efficient car
You can save thousands of bucks by switching to a more reliable and fuel efficient car. Suppose if you get a car that gets 25 per gallon over the one that gets 15, you will be saving 2,133 gallons of gas, thus saving $6,400 immediately
Few strategies to reduce fuel consumption:
- Look out for the cheapest gas
- Slow down since it utilizes less fuel and provides great control
- Limit the usage of heater and AC
- Never idle
- Keep your tires filled
- Carefully choose the gear
- Pay all your bills on auto-pay
Using auto-pay will ensure that you are paying all your bills right on time. This way you will also be able to avoid late charges. In addition to it, you can also enjoy a small interest rate from some loan providers if you enroll yourself in auto-pay.
- Turn off lights when its not needed
You will be surprised to see how much you will be saving by turning off electricity when it’s not needed. Such habits will help you in the long run. Practice the habit of switching off the lights, fans, AC whenever you come out of the room.
- Maximize your yard sales
Yard sales are probably the best place to score awesome deals on items. Consider the items you will need in your life like houseware items, clothing, shoes, sports equipment, etc. However, make sure you do not use the low price to be an excuse for buying things you do not really need.
Your budget is not for keeping you from enjoying your life. There should be a proper balance in your financial life; otherwise, you might suffer your life in debt. Budgeting is a way to take proper precautions if something goes south in your life. However, as a beginner, you might have various questions in your mind, and you might be looking for the right financial expert to answer your questions.
Questionnaire with a Financial Expert
The more questions you ask, the more strategies and ideas you will discover for saving money. It can help you make better financial decisions, making your future stronger for you and your family.
We have arranged a list of questions for Dave Ramsay to encourage you to make a more stable financial decision. Dave Ramsey, an American multimillionaire entrepreneur, and radio host, decided to answer some common questions that people usually have in mind.
- Can you suggest some effective ways on how I can control my spending?
Answer: We all desire to have the latest and greatest items for ourselves. On the other hand, some people make frequent small purchases that add up to a lot if you put them together. Your first step should be to recognize where your money is going and find out why you spend more than you should. Keep track of all your purchases and try understanding your “spending triggers”. Once you identify what triggers you to spend so much, it will help you make proper adjustments. This way, the next time when you make a purchase, it will force you to think. Just the act of thinking can save you from spending money.
- How much debt is considered to be too much debt?
Answer: We all require borrowing money to afford homeownership, post-secondary education or college. These are considered a good debt since they are borrowed mostly to improve life. On the other hand, having a car loan is considered a bad debt, but if it helps you go to a job or supports your family, it can be referred to as good debt. To answer your question, “how much is too much?” I think the amount will differ from one person to another, and it mostly depends on your income. But if you are struggling with clearing off your bills or you feel like taking out new loans to pay off the existing ones, it probably would mean you are in too much debt.
The best way to get out of the debt is by looking at your monthly cost and tries to trim down the cost. Pay down the debt using the money you have trimmed.
- What can I do if I exceed my budget?
Answer: Even after doing precise planning, we tend to experience unexpected costs from time to time. Sometimes due to urgent deadlines, students hire online assignment help, which tends to exceed the overall budget. The best solution in this scenario will be to look for external funding sources till you stabilize your business. If you fail to stick to the backup plan, make sure you are equipped with a backup plan. You may also set aside an emergency fund for contingencies.
- Is it the right decision to rely on software for customizing your budget?
Answer: The answer will be both yes and no. The ideal software would be to have a CFO, which will help plan your budget and customize it. However, even the best software cannot do creative thinking and creative strategizing.
You can also use money management apps or budget software to track all your spending and income. These are automated and organized programs that help minimize the ongoing busy work so that you can easily keep up with the financial management. The software will also indicate when you require revising your budget or conducting a financial audit.
- Should I consider KPIs when preparing my budget?
Answer: Yes, KPIs are essential for preparing a budget plan. It will point you in the right direction. It will help you plan the smaller details while focusing on the bigger picture. What may seem like a challenge to you is determining what KPIs need to be considered.
A few of the common KPIs include:
- Return on equity
- Turnover rate
- Operating cash flow and expenses
- Accounts payable and receivable
- Payroll expenses
- Burn rate
- Sales and marketing initiatives
We hope we had been able to answer your most common budget concerns. Budgeting paves the way to strategize short-term and long-term financial goals. As a beginner, you must be unknown to these areas. This is why we arranged an industry expert to answer the most common concerns you have.
- The smartest way to manage money is by following a specific budget. The budget does not necessarily mean you have to quit spending. It just means that you prioritize some financial goals over others.
AUTHOR BIO: Olaila lee is a financial advisor in one of the USA’s most reputed firms. She is also associated with MyAssignemnthelp.com, where she offers finance-related assignment help to students.