Starting to keep track of your expenses is never easy. Main thing you can do is to be patient and organized. To begin, develop a simple and realistic strategy, so you can save for all your short- and long-term savings goals.
Record your expenses
Start keeping track of all of your expenses. It may be hard to begin with but it will make your saving journey much easier. For that you can use mobile apps or a separate notebook. Once you have your data, organize the numbers by categories, such as gas, groceries and mortgage, and total each amount. Use your credit card and bank statements to make sure you’re accurate—and don’t forget any.
Budget for savings
Calculate the approximate amount you spend every month to turn expenses into workable budget. our budget should outline how your expenses measure up to your income—so you can plan your spending and limit overspending. Be sure to factor in expenses that occur regularly but not every month, such as car maintenance.
Find ways to lower your spendings.
Identify non-essential costs that you can cut back - restaurants, entertainment. Look for ways to save on your fixed monthly expenses like television and your cell phone, too. Think about your bad habits - just quitting smoking will save you at least 3000$ per year.
Set savings goals.
Think of something that you would like to spend your savings on - it could be a new car, apartment, trip to a country you’ve always wanted to visit. Having a final goal in mind is a good motivation to stick to saving journey.
The 50/30/20 rule
Break down your finances into 3 categories: Needs (50%), Wants (30%) and Savings (20%) Needs are bare minimum things that you need to spend money on in order to survive: bills, car payments, healthcare costs etc. Wants are the non-essential items or experiences that enhance your personal lifestyle. Like a dessert after dinner, it tastes delicious, but you don’t technically need it. Savings: By putting money in your savings you invest in your future. After satisfying your needs and wants you should put 20% of your finances into savings.
Once you’ve read the text on the topic, it’s time to test your knowledge.
Solve the following practice exercises!