The Best Way to Budget
There are a lot of ways to budget your money so many ways in fact you can spend a ton of time by just trying to find the best budget method. That is why I believe keeping it simple is key. That method is to pay yourself first. Read on and check out the video below from our YouTube channel Foundational Financial Knowledge and please SUBSCRIBE and check out our other videos and blog posts.
The wrong way to budget
When most people spend their money they start off the month by paying their bills (house, car, utilities), next they have their fun money (vacations, eating out), then if there is anything left they will save it. This never works because most people have nothing left at the end of the month. It happens moth after month and then they wonder why they are living paycheck to paycheck. After bills and fun money there is always going to be little to save because the priority is not on saving for the future.
The right way to budget
The proper order is to first set aside your savings then pay your bills then set aside fun money. This may seem like a slight change but psychologically it is huge and habit is the key to your success. In the following paragraphs I will layout some of the ways that you can make this easier and stress free each month. Before that though just know that this still requires some form of discipline and a budget. I won’t go into all the budget options in this post but there are a lot out there such as the 50/30/20 budget which I am a fan up since it is simple and doesn’t complicate things to much. If you haven’t looke there are tons of others. However don’t let that get you down because one simple principal rules all and that is to spend less then you earn. If you spend less then you earn and are saving before you go out and blow your cash on fun activities then you are already on your way to financial stability.
How to make it easy
There are a ton of ways to make this strategy successful and it comes down to what works for you to be disciplined but here are a couple of suggestions:
1. Automate saving: Use auto draft to put the amount you want to save each month into an investment or savings account as soon as you get paid. You want to make saving easy for you and not stressful. This is something that I do each month because I don’t even see the money in my account before it is out of money reach making more money for me in one of my investment accounts such as Edward Jones or Fidelity .
2. Set aside your spouses paycheck: If you are a two income household you can think of it as one income pays the bills and the other income is for saving. This can help partition the money so that you can think about from a different perspective. I’ve used this method in the past when I was working on paying down debt and we needed to put large amounts towards that debt and that helped us pay it even faster.
Not enough for savings?
Still there may be people out there that say they don’t have enough money to invest but there are always options that don’t just include cutting back. A budget is key in order to have a successful plan for saving.
1. Save raises: another way to increase your amount you save is whenever you get a raise at work continue to live the same way and put that raise directly into savings it is as simple as that.
2. Side Job: Most people have extra time on their hands where they can tackle a Side Jobs to make money money to put towards savings. There are a ton of options in order to find the extra money to be able to put into savings.
If you can master the discipline of paying yourself self first and not hurting yourself by spending more then you earn then you are on your way to having control of your finances!
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