Spending your money and earning money are the two things that need to be managed properly in order to live a financially stable life while also being able to spend on things other than your necessities.
Savings, budgets, and balance are words we grew up hearing but don’t know much about it. Below are some helpful tips for you to understand financial literacy in a much better way.
Savings are very much interlinked with mindful spending.
Wants and Needs
It is extremely important to differentiate between one’s needs and wants.
Needs are your necessities; it’s almost like a special kind of want which you must have in order to survive, for instance, food, water supply, and a roof above your head.
Now when we take a look at our wants, it’s the day-to-day desires that you think of: to buy a brand new phone, a shirt because it’s trending a new car. But you know you can live without buying that new phone or that shirt.
Once you learn how to control your wants, you can easily support your needs.
Budgeting
First, calculate the total pay you take home, the money you are earning monthly. Next, know your fixed expenses that fall under the category of needs like bills and taxes.
Now you need to make a list of all the things that you spend on monthly other than your fixed expenses. This is where you will find out where you should restrict your spendings.
The above two categories, once calculated, need to be subtracted from your monthly income so that you know what balance you’re left with. Now, this is your time to think about your monthly goal of savings or investments you’re doing or contribution to any financial goal you’re trying to achieve.
The balance goes for the last category. The key to following your budget is taking away temptations to avoid overspending.
Tackle pressure
Almost every day, you find yourself in situations where there’s an offer or opportunity that can cause you to break the bank or not follow your budget properly. A trip to Hawaii, a night out with friends, or just another shopping spree.
These are times when you get hit with money peer pressure, you know the only way out of this is to decline the offer, but society guilts you into making really poor financial decisions that can cause you financial stress and make you spend money you should be saving. Tackling societal pressure is hard, but the results are promising for a stable future.
Hack Your Spending Habits
30-Day Rule
This is a simple yet effective rule, when you see something you want, wait for at least 30 days before buying it. After 30 days, if you still feel like you have to buy that, go ahead and buy it. But if you forget about it or make up your mind that you don’t need it, you will end up saving that money. Money not spent in the wrong place is money saved.
Sale, discounts & limited-time offers Sales are a huge attraction, just the thought of spending less money on something sounds convincing enough to buy something that you don’t necessarily need.
Now, if you come across an item that is on sale, ask yourself if the same item was not on sale and you had to pay the full price, will you still be buying it? If yes, then you know that’s something you really need, but if the answer is no, don’t buy it as you were spending your money on it because of the sale or the “discounted price.”
Prefer Cash
Paying in cash will most likely help you save money and make fewer impulsive choices, paying in credit cards sounds more of a convenient option, but you’ll, in most cases, end up spending more than intended as the money is not in your hands and you’re not really paying attention to the amount.
Environment & Habits
Try to avoid the visual attraction in your surroundings in order to be less prone to spending excessively. You’re more likely to spend on things unnecessarily if you’re visiting places that have more malls, fast-food restaurants, and hotels.
Consider this scenario, you’re going home, and on your way back, you take the route which is less cluttered with attractions like sales billboards, shopping malls. But if you go on the streets with these attractions, it is highly possible to make a pit stop in order to buy something or succumb to visual attractions surrounding you.
Why Spend?
Finding a balance is really important. Sometimes it is better to spend than to save when it comes to your health, happiness, and well-being. Buying what you’re saving for, things that are convenient and save your time, bring you joy should be things you spend on.
Some people also spend money by investing, and that is a genius way to build wealth. Don’t let saving money, budget, and expenses consume you; go easy on yourself and make smart decisions that you don’t regret later.
Spending money on yourself and your family is as important as saving.