Planning your expenses is an important thing which you will need to do if you would like to have a certain level of savings or even want to invest minimally in order to get a decent income flowing when you wish to retire. What this article aims to do is provide some easy tips which you can immediately carry out in order to control and at least help you curb your expenditure and spend wisely. I will describe this in two phases. The first is what I would call structural methods. In this section, I will describe to you some methods you can use to at least implement a system into your personal finances so that you will have some form of financial plan for any period of time in place. The second is what I shall call personal methods. These are methods and habits which you can carry out for your everyday life. Believe me, these will at least improve how you plan your finances.
a) Budget your finances, Monthly, Weekly and Daily.
Yes, the first thing that will come out of the lips of everyone when they talk about personal financial planning is always creating a budget. And for good reason too. Creating a budget for your finances would at least provide a system for you to actually set aside some money for whatever purposes or things you wish to get, or even cover you in emergencies. While most people would recommend that you plan your budget monthly, I would suggest that a monthly AND weekly plan would actually be beneficial. Why? Because anything can happen within a week that may result in us tweaking or compromising our monthly budget plan. I will cover daily budgeting in the personal section later.
An example of how to do monthly budgeting is to firstly, list down all your necessary expenses. This can range from monthly household items like bills for the home to even the amount of allowance you give your kids. Minus off that from your income (usually your monthly salary only) and you should have a balance. Now plan the amount of savings you believe you can draw out of that monthly balance after you have already taken away necessary. I strongly recommend you set aside at least 10% of your income before expenses as savings to ensure that at least you have some cash for a rainy day.
The same can be said for your weekly planning. Plan for weekly expenses or events which you know you need to plan for in the particular week. It can range from things like grocery shopping expenses, or even the pizza you feel you want on that week because of a night of Football or Soccer on tv. This will allow you the flexibility of changing the monthly plan, without being so drastic about it.
b) Sign up for a monthly savings account from a bank.
Well, if you do not want the hassle of planning to save (though I feel it is VERY IMPORTANT that you do), you can try signing up for a monthly savings plan with your bank. What happens here is that when you sign up, every month, the bank will withdraw from your main bank account a certain set amount into another savings fixed account. This way, every month, you will have peace of mind that at the very least, you have set aside a certain amount of money for savings. If your local bank does not have such a service, then you could open a fixed account, which will not allow you to withdraw the cash, but will ensure you will save every month.
a) Plan your daily budget.
Alright lets get personal. When I am talking about personal daily budgeting, I mean that limit your amount you wish to spend daily. Also, watch what you are spending on and really ask yourself “Do I Really Need That Thing?”
This is due to the fact that we buy a lot of things on impulse. Hence this is why we need to be conscious about what we are spending on and limit the amount which we are willing to take out for expenses on that particular day. Remember, BUY ONLY WHATS NECESSARY. Try not to spend beyond how much you have set aside for that day.
b) ALWAYS ask for a receipt and other small tips that you can use.
There are small everyday habits which you can use that can make a whole lot of difference in your lives in terms of personal finance. For one, I personally find keeping my receipts of my purchases useful. This would allow me to keep track of my expenditure for the day or week, and will also tell me what I spent on and what I can reduce. Another tip I can offer is to really practice delayed gratification. What I mean by this is, do not immediately jump in whenever you see the latest tech gizmo on sale, or that scarf on discount. Hold yourself back and question yourself whether is it really worth it? For example, once I saw this iPod Nano selling for $130 and it was ON SALE. I felt myself wanting to jump in, but I held myself back, thinking do I really need this? That held me back and stopped me from making that wild eyed decision. True enough, there was another shop selling it for even cheaper. At $100, and it’s a 4th Generation model.