Budgeting and Discipline
Budgeting is a way to calculate ones income and expenses to save money. To start a budget, figure out where all the money is coming from, this can be found out by “review of your bank statements, pay stubs and other financial documents…¨(Goldberg, 2018). Calculate fixed expenses and look at other needs such as gas, food, entertainment, etc. One of the most effective budgeting format is the 50-30-20 of course everyone’s budget is different so stay as close as possible to these numbers. For example, let’s say someone makes $3,500 a month first off pay all fixed expenses for example mortgage, auto payments, electric bills, etc. This is the 50 percent, things that need to be done every month in this example $2400. Second is the 30 percent these are the wants because everyone need to be able enjoy themselves and their money so lets say $850. Lastly is the 20 percent this is savings even though it is the smallest percentage it is the most important leaving $550. Well compared to the scale this seems more to be a 60-25-15 most of the money is going toward fixed expenses.. When doing a budget making sacrifices is a major part in the beginning because this is.when one will have to decide if they truly should be paying for something they don’t use often or at all. Spending on a budget is one of the things that someone must learn to discipline themselves.
Spending on a budget is a very big thing, because this is what will show how much is going in to savings. To spend wisely is “to align your spending with your values”(Taylor, 2017) this is when the sacrifices come in place. For example, decide genuinely if something is needed if someone is paying for Hulu and Netflix decide which one gets more use out of both of them. Next way to spend wisely is find out about sales happening such as holiday sales or winter/summer sales save up money for these sales they will help to accumulate money over time. When clothes shopping on a budget start looking in the clearance section because clothes are 50% or more off the original price. Before going grocery shopping create a grocery list to restrict excessive buying and this will get rid of distractions. Save up coupons, in the long run the money saved from coupons adds up quickly. Most importantly, the best way to spend money is to not spend it on ¨things that really don’t matter in the grand scheme of things¨(Muller). resist the urge, money is a dangerous thing that can lead to making unreasonable decisions. Lastly, shop alone, shopping with peers can also lead to poor decisions either out of peer pressure or feeling left out. Shopping alone will lead to decisions made from thinking rather than emotions. Now, what are the best ways to save money daily?
Daily and Long-Term Savings
When it comes to saving money it starts with a good mindset one way to think of it is “Avoid thinking of money-saving techniques as restrictive ”(“How to Save Money: Daily, Monthly and Long Term”, 2018). .It might seem that way at times but think of it as a way to prioritize other financial goals over others. To start off, use a budgeting app to track savings and to see the amount of money saved since the beginning of the budget, this will restrict from buying excessively due to. Reduce online purchases, purchases online are so easy to do that there is no thought process when doing them, one way is to unsave billing information so before checkout all that information has to be typed again and will most likely lead to less purchases online. Social life doesn’t need to suffer to save money but eating out everyday will deal “a major blow to your bank account” (“How to Save Money: Daily, Monthly and Long Term”, 2018). When dining out order an appetizer or if dining out with another person split an entree. Gifts can also add up in price, another way to get gifts is to DIY, this will make them more special for the recipient due to taking time out the day to make the gift. These are some daily tricks to save money but what can be done about long term?
Long term savings are equally as important as daily savings. Long term expenses are what cost the most money and will take a big part of monthly income. First of all, find other cable packages that provide channels that are used most frequently or watch videos on youtube.
Saving Money in Your Household
Depending on different providers bundling both internet and cable can save $40 dollars a month “save more than $1,000 over two years” (“How to Save Money: Daily, Monthly and Long Term”, 2018). Furthermore, refinance a car loan to get better interest rates this can save “$1,000 or more over the life of your loan.” (“How to Save Money”, 2018). Car loans can get really expensive refinancing to get a better rate will save money over a elongated amount of time. Lastly, change cell phone plans for example Verizon, T-mobile, and AT&T all have the same deals a month but Sprint has a very special deal for 5 lines pay $20 a month, get some family members involved and save money with Sprint. This deal lowers down monthly cost and helps friends and family. Another way to save monthly on a cellphone is to get change or remove insurance plans, some plans provide warranties and 24/7 tech support. If a cell phone works for a reasonable amount of time there might be no use of having a plan. Simple tricks around the house can also save money such as take shorter showers, change light bulbs to be dimmer to save money on the electric bill, and lowering the temperature on the water heater can also save money. This can “lower your bill by as much as 25%” (Sheehy, 2019). Now, lets head back to the 50-30-20 budget.
With these methods in mind let’s see if we can fix our budget. With bundling the cable and internet, changing the cell phone plan, refinancing the auto loan, the total cost of the fixed expenses is now $1925 compared to $2400 saving $475. Now on to the wants, making a grocery list, shopping in the clearance section, and using coupons on top of all that, spending is lowered to $394 compared to $850 a month saving $456 a month. Lastly, what this whole budget is for which is savings, are now at $1181 a month, compared to a measly $550 a month. Now this budget looks more like 55-25-20 of course it’s not a 50-30-20 but every budget is different and in this case it is as close as possible to the plan. Now that a much more significant amount of money is being saved, what can be done with this money?
Paying Debt
The first thing to do with all of this saved money is to pay off all debts. Debt can affect emotional health such as fear, panic, stress, anger, etc. It is rare for someone to not have some amount of debt, but how someone deals with it is what decides these emotions. Taking care of debt is the same thing as a budget, it all comes down to a person’s mindset and how they take care of a situation like this. Problems like this will never just go away it takes a strong mind to get rid of a difficult problem. The first step to take with the money saved is to “calculate your total amount of debt in order to take action against it.” (“How to Pay Off Debt”, 2018). Secondly, make a list from smallest to largest disregard interest rates at the moment. Start paying the smallest debt, as the smallest debt gets payed off use that money towards the next largest debt, this is called the “debt snowball” (“How to Pay Off Debt”, 2018), this snowball effect is slow but overtime will take care of debts effectively and quickly. “Debt keeps us in the past and prevents us from focusing on our future”(Cruze, 2019).
Investing
Now that the budget is set and debt is paid off this would seem to be the end and keep on going with the budget but part of saving money is making most of the money saved. The number one way to make most of the money saved is to invest. Investing might seem like a tough and long process but if one can learn how to invest properly, it can increase the amount saved by a great amount. There are two different ways to invest, someone can do it themselves and choose what they want to invest in or someone can hire professionals to do it for them “nowadays it’s quite affordable — cheap, even!”(Royal & O’Shea, 2017). Someone who wants to do their investing by themselves won’t have to pay anybody but also will be taking a bigger risk if not careful with their purchases, but someone who has hired a professional will have to pay the investor for their work but the investing will be done by somebody who knows what they are doing. Once decided choose what to invest in Stocks, Bonds, and Funds. Stocks are portions of a company that has the potential to grow equalling income, Bonds allow companies to borrow money with monthly payments but will all be returned and more on a set date. There are two types of funds stock funds and bond funds, stock funds are a bundle of stocks and bond funds are a bunch of bonds in one. Long term investments are for trips, purchasing a new house, but ultimately retirement. Short term investments are monthly payments, vacations, or a emergency fund. Investing money can change someone’s saving drastically.
Budgeting is a very powerful technique with a strong mindset and hard work anyone can fix or strengthen their financial situation. From learning how to spend to using tricks to save more money long term and short term to getting out of debt. Finally, investing to increase the amount of money saved. In conclusion, budgeting is a power that can change anyone’s life forever.
