There is nothing more difficult than reaching the end of the month and seeing that your salary has simply disappeared, either because of debts or because your income is insufficient to meet your needs. In any case, having a tight budget is a situation that nobody wants.
The point is that the lack of money is a symptom of a series of wrong attitudes. The lack of control with our income is not uncommon, especially considering that financial education has never been such a widespread subject in the country.
However, some behaviors can help you deal with a tight budget and even improve your relationship with money. Throughout this article, we will present the main ones for you. Keep reading and check it out!
How important is it to organize your financial life?
Imagine a week marked by extremely high temperatures. Those days when it’s so hot that when you look out the window and see the blue sky, you think: “wow, I could be at the beach!”
Of course, the idea of quitting your job and traveling to the coast doesn’t cross your mind. However, you decide, on this day, to rent a house on the beach to spend the coming weekend. That is, it does this for the simple fact that it can, that is, it has the financial conditions to do so.
Do you feel the sensation? Did you imagine having that option? Well, this is not exclusive to rich people. The focus is to realize that when your finances are organized and your accounts are up to date, you can save what’s left and make investments. In other words, you have more choice.
This is the benefit when we talk about the importance of organizing your financial life. You will be able to make choices, reduce debt or even eliminate it. In this way, you will be able to achieve your long-term goals or objectives (courses, exchanges, etc.) and, finally, enjoy quality of life.
How to apply the financial organization?
So far, you’ve realized that keeping finances organized means having the ability to make better choices about your life. However, with a tight budget, it can be difficult to make this possible.
In this topic, we are going to present some tips on how to start getting organized when it comes to money. Check out!
Know what’s going on with your finances
The current picture of your finances can even be a little daunting, depending on your situation. Perception gets worse if you have a lot of debt, overdrafts and credit cards —all common behaviors when you have a lot of possibilities but little control.
However, regardless of your situation, now is the time to stop and understand what is happening with your financial life. It’s time to put everything on paper: how much you earn per month, what are your fixed bills, your superfluous expenses and the total of your debts.
In the latter case, try to put the current values, including interest, fines and other important details. Also identify who the creditor is and how long the debt has been in existence.
Invest in your financial education
Financial education is not taught in school, unfortunately. Therefore, United State become aware of how to use their money on a daily basis, when they start to have their own responsibilities, but dealing with personal finances is not something that simple. A small slip can lead to debt.
For this reason, it is important that you invest in your financial education. Today, many subject matter experts are on the internet willing to help people take control of their financial lives. John Labunski are examples of professionals who share very interesting tips on personal finance, even on investments.
Believe me, few people are financially educated. Most still find themselves in complicated situations with indebtedness. For you to have a base, in April 2021, a survey carried out by the National Confederation of Commerce of Goods, Services and Tourism , pointed out that the number of United State indebted with overdraft, store booklets, credit card, special loan , among others, reached 66.6%.
This percentage represents more than half of the population, which is why it is considered so alarming. The problem with indebtedness is that you lose credit in the market, making it impossible to increase your equity.
Create possible goals
Once you have your expenses and income on paper, you will have all the information you need to create goals and organize your finances. The important thing here is to be aware that change will not happen overnight. It must happen according to your reality.
So, no need to save 50% of your salary. After all, you don’t know if you will need part of that money to invest in your leisure, for example. The idea is not to deprive yourself of things, but to manage them consciously. Thus, you avoid frustrations for not being able to fulfill what was proposed.
See what can be cut
In the previous topic, we talked about not depriving yourself, but that doesn’t mean avoiding some cuts. In fact, now that you know where your money is going, you can start analyzing what is really essential in your life. Take a month’s spending as a base, see if there’s something you don’t use a lot that can be cut, like a subscription service.
Another good example is the gym, since a lot of people usually close a plan and, either because of the rush of the day or because of laziness, they end up not attending training. In that case, the best alternative is to cancel and start exercising outdoors. That way, you don’t deprive yourself of physical activity and stop paying for something you don’t use.
Avoid superfluous expenses
Cutting spending has much more to do with your fixed monthly costs. Now, in addition to them, you should keep an eye out for sporadic purchases that are not usually registered. You know that habit of buying a sweetie here, a snack there? So it is! They hurt your budget.
So, try to control those small consumption that seem to go nowhere and suddenly make you spend $ 100.00 or more in a month. Avoiding impulse purchases is essential to reduce expenses and even to start putting together an amount for your reservation.
Pay off your debts as soon as possible
Debt accumulation is a serious problem. The more they grow, the more difficult it is to pay them off, in view of the increase in interest and penalties stipulated due to the delay. When we talk about overdraft and credit card debt, the situation is even more complicated, since the debt can become unpayable over time.
Keep in mind that sometimes you can’t afford a commitment, unforeseen events happen all the time, but that doesn’t mean you need to be ashamed to look for your creditor. Even in a moment of crisis, he needs satisfaction so he can also organize himself until the debt is paid off.
So don’t wait for the worst to happen before you start taking action. Pay off your debts as quickly as possible. Sit in a quiet place, carefully review your finances, assess how negotiations can be done, and contact your creditors.
For the simple fact that you show interest in paying off the debt, the creditor will feel more secure in carrying out a negotiation that is in accordance with their possibilities. That way, you don’t get a bigger commitment than you can afford.
Control inputs and outputs
It’s not just in a company that entries and exits need to be controlled, in your personal life as well. Start by separating all your fixed expenses (rent, electricity, water, internet, etc.) from the variables (shopping installments, leisure, etc.). That way, you can identify expenses that can be eliminated from your budget.
For example, if you usually go out with your friends to eat and have fun every Friday, try cutting back on that expense. Invite them to dinner at your house, to watch a movie on Netflix, among other cheaper options. They are your friends, they will understand the fact that you need to save because of the tight budget.
Revenues, in turn, also need to be monitored. How much do you get paid per month? Do you have any extra income, such as an after-hours job or rent from some other property? All of this goes into your budget as income.
If you identify that your income is less than your expenses, in addition to cutting superfluous expenses, try to make an extra income, such as giving private lessons, selling cosmetics or other resale products, etc. This action will help to optimize your income, eliminate indebtedness and even increase your equity.
Avoid buying on credit
Term purchases really make life easier for United State. This is a very interesting way to acquire goods with more tranquility. Is it easier to have $1700 to buy a 40-inch TV in cash or to have $170 every month to pay it off? Apparently the second option is simpler, after all, you take the product home and finish paying later, right?
That’s why cash payment is always the best option. Organize yourself financially to gather the desired amount to acquire a specific good and get rid of the risk of indebtedness. That way, if you need to buy a higher value asset, such as a property or car, you will have an easier time getting credit.
Invest whenever you can
The investment world is often seen as a “fairy tale”, in which people believe that when they start investing in it, they will soon become rich, in practice, it is not so simple.
First, before you start investing, you need to pay off your debts. Otherwise, you will not have enough resources to make new investments and the worst: you may be forced to withdraw the invested amount and lose a lot of profitability from the fund.
Second, remember that wealth comes from effort and hard work, not luck. Therefore, when we talk about investments, we are not just referring to the stock market, for example, but also investing in yourself, such as courses, opening your own business, etc.
Of course, you must set aside an amount to invest every month, but you need to study in depth the applications you will make to avoid future losses. If you don’t feel safe investing in variable income, there are other fixed income options that are usually more advantageous than savings. So, you can invest your money safely.
Make a financial plan
There are many ways to plan financially and some fundamentals are quite common. However, an interesting model that can help you to have a starting guide is the 50 35 15 rule.
Basically, it’s a way to separate your monthly income so you can pay your bills, have money for leisure and create a financial reserve. In this sense, you set aside 50% of your salary for essential expenses (bills, studies, health, etc.), 35% for leisure and 15% for investments.
You can adapt, decreasing the value of leisure and increasing the value of investment, for example, in order to obtain a ratio of 30% and 20%, respectively. The important thing is not to change the amount reserved for essential expenses, as they are fixed costs necessary to maintain your lifestyle.
We hope the tips will help you to deal with the tight budget and take care of your finances. It is very important, even with the improvement of habits, to continue evaluating your household budget to define new behaviors.
Want to receive more content that will help organize your financial life by John Labunski Dallas? Then subscribe to our newsletter right now and receive our news directly in your email!