Personal finance isn’t as easy as some people make it seem. Spending money is easy, saving money is difficult and being broke is a monthly struggle for many young adults in the world. Everyone talks about how you need to be smart with your money, but no one really goes into the detail of what that means.
There are a variety of ways you can be smart with your money and, depending on what your financial situation is, a handful or one of the following methods should work for you. You need to assess your current financial status and see where you can make some realistic changes.
Have a budget plan
Regardless of what your financial situation is, everyone needs to have a budget plan drawn up which they can follow every month. On this budget, you need to list your sources of income, all of your fixed monthly expenses and any luxury expenses. This will give you an accurate overview of where your money goes every month and where you can re-budget in order to be more “comfortable” with your money every month.
There is a 50/20/30 budgeting rule that you can use to start budgeting. According to this rule, 50% of your money should be going to your fixed and essential expenses such as rent, groceries, insurance and medical aid, for example. Then, 20% of your income should be distributed to financial priorities such as savings (always transfer at least 10% into your savings account) and any other debts that need to be paid off. The final 30% is what you’re left with to spend on subscriptions, memberships and shopping as you wish. If you find you can’t fit your income into this budget plan, you might need to rethink the types of things you’re spending your money on every month.
Use a finance calculator
If you ever need to take out a personal loan or buy a car, make sure you use a finance calculator. Car finance calculators, for example, are able to tell you exactly how much the price of your car actually is after years of interest and will indicate how much money you’ll be spending every month to try and pay it off.
If you want to fit loan repayments into your budget you need to know exactly what financial commitment you’re getting into right down to the cent. Otherwise, you won’t be able to accurately reshuffle your budget to keep your lights on or tummy full.
Use your credit card responsibly
There’s nothing wrong with having a credit card and, as an adult, it’s necessary to maintain a positive credit score in order to get anywhere in the adult world. You can have a credit card and use it as long as you’re responsible about it.
Pay off your credit card debt as soon as possible and never draw or transfer money from your credit card. That’s asking for endless credit card debt repayments. Which is not where you ever want to find yourself.
Debit orders the day after payday
Another smart money practice is to set your debit orders for the day after your payday money reflects in your bank account. This way you’ll never spend more than you’re supposed to and you’ll always have money in the bank for when those debit orders go off.
Have a “no-money” weekend
Start out by trying this once a month, then, if you succeed, you can try and do it more often. But try challenging yourself (and your friends as they’re usually the main reason you end up spending more money than you should be) to have a “no-money” weekend. Now, a no-money weekend is as simple as that, don’t spend any money.
No coffee dates, lunches on a wine farm or nights out for a whole weekend. It is possible to do and you’ll realise very quickly how many things one can actually do without having to spend any money. And you’ll have more money left over at the end of the month because of it.
Sign up for rewards cards
If you simply must shop and buy new things, be smart about it. Wait for the sales, compare prices between different retailers, leave it in your online cart until you’re offered a discount and sign up for rewards cards at the stores you spend the most time and money in.
This way you’re more likely to get a good deal and save some money. Even if you have the money to pay it in full, never complain when a bargain presents itself and never think of it as a shameful or cheapskate act. It’s how to be smart with your money and still get the all the things you want. Waiting for an item to go on sale before you pay for it doesn’t decrease it’s quality or value to your home or wardrobe at all. It makes you the smarter money spender.