We live in an era of instant gratification that makes it more difficult to track our spending habits and get more focused on saving money. A study conducted in the U.S in 2017 revealed that an approximate of 78% Americans live on paycheck to paycheck. This means that the majority of Americans have no idea how to create a budget and they rarely save.
For you to make a significant change in your finances, you will need to assess your current situation to decide on the best steps to take moving forward. You can also opt to increase your paycheck by finding online jobs that you can work part-time. However, you’ll still need to check your budget.
If you would like to know how to budget your paycheck for a more fulfilling financial life, this is the perfect read for you. We are going to look at 10 effective tips that will revolutionize your finances forever.
1. How to Budget Your Paycheck 101: Consider the 50/20/30 Rule
The 50/20/30 rule has been designed to help you figure out the amount of money you ought to spend on a particular area depending on the priority. Needs are organized into three categories depending on their urgency.
- Essential Living Expenses. These are the vital expenditures necessary to maintain the fundamental of your life. 50 percent of your income should go towards fulfilling these expenses which include food, shelter, utilities, and transportation.
- Funding your Financial Goals. This means that at least 20 percent of your income should go towards building a financial foundation that will be sure to benefit you in the future. These include contributing to retirement, saving paying off a debt if you have any.
- Lifestyle choices. These are personal fun choices about how you spend your take-home pay. As a rule of the thumb, you should not spend more than 30 percent of your discretionary income on lifestyle choice: these expenses will include entertainment, gym fees, internet, and phone payments, hobbies, charity, pets, personal care, shopping and such. While these miscellaneous expenses should be the last things in your budget, you should not feel guilty about a bit of indulging as long you’re essential and financial expenses have been sorted first.
As it is evident, this rule is very flexible which makes it easy to incorporate in our every day’s expenses to allow easy budgeting.
2. Cut Down Cable Bills
It may sound ridiculous to cut out on TV but services such as Netflix, Hulu, and Amazon Prime allow you to watch your favorite TV shows and movies for a cheaper cost compared to the cable TV.
You may still the internet to stream these shows but it is way cheaper than the cable. It is believed that the average American household spends $103 monthly on the cable bill, therefore, eliminating this expense can greatly improve your budget.
3. Monitor Your Subscriptions
We live in the internet age, which is full of subscriptions some of which are non-essentials. Most Americans have at least two subscription services they have signed and in most cases, they no longer need those subscriptions.
The fact is that whether you have stopped using a particular subscription but haven’t canceled, it still continues to count in your expenses. It could be that you are still paying for a magazine you rarely read or a subscription to Amazon Prime or Netflix that you no longer need. It is prudent to go through your subscriptions and cancel any that may be using your hard-earned money in vain
4. Save on Utilities
Power and water take a huge a chunk of your income every month but you can easily save money on these utilities by being a little bit creative. For starters, changing all the light bulbs in your house to energy saving LED will save significantly on power. LED bulbs are more expensive than the regular bulb but it is a worthy investment that will see your power bill drop at a significant rate.
The same goes for your water bill. You may consider switching to low-flow showerheads, taking quick showers and avoid the bathtub (low flow shower heads are more economical). Also, ensure that all faulty faucets have been repaired as a leaky faucet can waste up to 2000 gallons of water every year. These are simple hacks that will ensure that y you enjoy convenience at a cheaper budget.
5. Consider a Different Insurance
Insurance prices change all the time, and if you are like most people who set up their insurance and forgot about it, then you should consider shopping for a new cover. You could save money by shopping around and the beauty is that you can easily do this online at the comfort of your laptop.
In a few minutes, you will be able to get new prices for your insurance cover and you can decide whether you will be able to save or not. This will take a short time but it has the potential to save you some money that you could use on other needs such as buying groceries
6. Plan for Your Meals Ahead of time
Eating out is the number one expense in most households. Take a few hours every weekend to shop for the groceries and write out a meal plan for the entire week. Home cooked meals will save you money spent on restaurants or paying the food delivery services.
On average, it is five times more expensive to eat out or to order food from a restaurant than to cook at home. Avoid processed food which is more expensive and less nutritious but instead opt for common ingredients that are easy to find and can be used in multiple recipes. In addition, make it a habit to prepare your coffee at home most of the time.
7. Think Twice Before Clicking the “Buy” Button
Since you can have anything you want at the click of a button, it is important to practice self-control to avoid impulse buying. You can train yourself to wait for at least 24 hours before buying a product that exceeds a certain amount. The following tips are essential in helping you to stop impulse online shopping.
- Do Not Save your Credit Card Information on the Retailer’s Website. This is a trap that many have fallen into as they are convinced that it is more convenient and time-saving. On the contrary, entering your billing information manually will give you extra time to consider if you really need the item.
- Do Thorough Research. Take this time to search for comparable products and to read reviews from previous buyers. By the time you finish performing all the due diligence, you might discover a cheaper product, a better version of the item or you might realize you don’t need it in the first place
- Limit Time on Shopping Sites. If you are obsessed about online ‘window’ shopping, then its time you consider limiting the time you spend on these sites. It is important to stay focused when visiting a website for a specific purchase to avoid filling your cart with unnecessary purchases. Technology has made it easier by developing apps that limit the amount of time you spend on shopping websites; you can try them out.
Instant gratification is so real we can’t ignore it. However, making a budget and sticking to it will help you to get just the items you need once you land on that website. Think deeply before making any purchase to ascertain whether it will add any value to your current situation.
8. Quality Over Quantity
Sometimes it can be tempting to go for cheaper products, especially when striving to make a budget. However, as budget-friendly as the product can be it may not serve you for a long time forcing you to make a trip to the store after a short time. It is advisable to save up money and get the best quality option of an item that will be sure to serve you for a longer period of time.
For example, buying high-quality clothing and shoes will save you more money in the long run as you will be able to wear the clothing for long before they wear off. The same case applies to food whereby spending more on organic nutritious food, will nourish you more than the prepackaged processed foods which can also pose danger to your health. This is an important aspect if you want to learn how to budget your paycheck effectively.
9. Opt out of Tempting Mailing Lists
Retailers will do anything to make you feel that you are losing a great deal if you do not make a certain purchase. They will arouse a desire to buy an item that you had not planned for, therefore, it is important to unsubscribe from these alluring deals.
10. Use Social Media and Adapt to the DIY Regimens
Self-care is vital for a productive life but if you are keen on budgeting, you will note that pedicures, manicures, massage can take a toll on your savings. While it is okay to indulge once in a while, you can utilize social media tools such as blogs, YouTube and Pinterest to find repairs and other affordable daily routines that can save you money.
It’s Time to Learn How to Budget Your Paycheck
Living paycheck to check is an ordinary phenomenal in most households. It is critical to have a major paradigm shift in your financial life so that you are able to budget your income regardless of the amount in your paycheck.
Remember to create a savings plan to divert your extra income. If you have idle cash lying around the house, you may just find yourself spending it again.
If you have been wondering how to budget your paycheck, the above tips are essential and they will guide you through. Check out our vibrant library which is dedicated to giving tips on how you can achieve a flamboyant financial life.