Let’s be honest—managing money isn’t a piece of cake, especially when there’s already a lot on your plate. But here’s the thing: budgeting your income doesn’t always need to be stressful. All it takes is practical money skills and a workable financial plan and you’ll be on your way to your ultimate goal.
If you’re trying to figure out how to achieve that goal, here are three practical budgeting tips you might want to try your hand at.
1. Create your budget using the 50-30-20 rule
The 50-30-20 method was introduced by Elizabeth Warren, a former bankruptcy law professor at Harvard University and a politician in the US. This method is one of—if not—the most beginner-friendly and popular budgeting methods you can try if you’re looking for ways to manage your expenses.
As you can see, this method is divided into three parts: 50%, 30%, and 20%, which adds up to your entire income or take-home money. To help you better understand the rule, let’s look into what these numbers mean and what kinds of expenses fall under each category.
- 50% – This category is for your needs or the expenses that are fixed and non-negotiable. These include your electricity bills, housing or rent, insurance, mortgage, transportation, healthcare, groceries, and other essential bills that aren’t up for debate.
- 30% – This will cover all your wants—movies or concert tickets, gym membership, shopping, adventure trips and vacations, dining out, new gadgets, or other hobbies and things that will give you a breather.
- 20% – This last category will include your savings or financial goals. This will cover your payment for debts, investments, loans, savings, retirement and emergency funds, and others—basically the most important portions that can help you achieve financial freedom in the years to come.
Now that we’ve identified what each category means, you probably have an idea of how you will allocate your budget. But in case you’re having a tough time executing the plan, here are three easy steps that can help you kickstart and make the 50-30-20 budgeting method actually work.
Step 1. Compute your take-home money monthly.
Your total monthly earnings (minus all the taxes and other mandatory deductions) will be the 100% that will be divided into three parts we mentioned earlier. You don’t need to have a huge amount of salary to start, just know how much you bring home every month and start from there.
Step 2. Identify which expenses fall into which category.
Know which types of expenses will go to your 50% or needs, 30% or wants, and 20% or savings. Now, for the tricky part: determining your wants versus your needs. Don’t get confused! Bear in mind that the expenses that fall under your 50% must be the things you need to survive. Otherwise, it’ll fall under your wants or the stuff for fun and enjoyment.
Step 3. Compute and allocate your budget.
After carefully listing down your expenses, calculate the amount you’ll allocate to each category. This will help you not go beyond your budget and adjust your expenses when necessary, especially during tough times.
This method may seem overwhelming at first since it’ll require you to make lists, prioritize, and do the math. On the flip side, when executed successfully, these tips on budgeting your money can help you save not only during the challenging times but also for better days.
2. Utilize the resources you currently have
One personal budgeting tip that you can try is to use the resources in front of you. This doesn’t mean you’ll have to sacrifice your wants, but it’s actually more of prioritizing your needs.
Let’s say you’re thinking of replacing your 2-year-old smartphone with the latest model. If your current phone still serves its purpose and you’re replacing it just because of an additional camera lens, a bigger screen, superb audio quality, or a personal tradition of changing phones after a year or two, then you might want to rethink and consider things that are more important.
The same goes for shoes, clothing, and other expenses you have. Instead of replacing your stuff over and over again, why don’t you try to have them fixed first and see if it’ll save you some extra bucks for your non-negotiable expenses? Another good practice is to take good care of all your stuff so they last longer. Imagine how much you can save if you won’t buy a new pair of earrings or jeans every quarter. Quite a significant amount, right?
You can also skip food deliveries and bring out your inner chef instead. Are you craving pizza? Browse the web for easy recipes and use the ingredients available in your kitchen. Doing so will help you unleash your creativity in cooking, plan your meals, and be more resourceful.
Here’s a bonus: Cooking your meals at home means you can save on delivery charges! Now that’s one of the small ways you can make money during tough times.
3. Find side gigs or other sources of income
Knowing where your money will come from is as important as knowing where your money should go during turbulent times. That’s why it’s essential to have side gigs or multiple income streams. This may sound challenging but not if you know what you’re good at.
You don’t need to be a pro to start. Just know your skillset and you’re good to go! If the kitchen is your favorite spot in the house, you can try baking cakes and pastries or cooking delicious meals. If you’re a student looking for ways to earn money online, you can try searching the web for writing and editing gigs, design projects, and more.
For those professionals who want to explore other interesting sources of income, why not try to enter investment markets or buy USDT on Paxful? We have a lot of exciting offers that you surely won’t want to miss out on! But if you aren’t very interested in the financial world, you can try browsing various websites to find an online job that best fits your skills, interest, and needs.
It’s now or never
Tough times require tough decisions and that includes your financial health. You can’t move a step closer to effective money management habits if you add these best budgeting tips into your “Do It Tomorrow” list. All it takes is your commitment to achieving financial independence
Explore ways that will help you make effective financial decisions and attainable money management practices, then try and try until you find comfort in these healthy habits.
Remember, consistency is key. Developing healthy financial habits during turbulent times isn’t easy, but practice will always make progress before it makes everything perfect.
*The content of this article is for informational purposes only. You should not construe any such information or other material as legal, tax, investment, financial, or other advice.