Most of us were taught about saving money as children with a piggybank. Although the excitement of dropping in a few pennies has probably long gone, saving and its cousin budgeting are an important part of managing adult finances. Of course even the best of us struggle with this from time to time, and unforeseen expenses can often leave us in the red and panicking. There are however some tried and tested strategies and backup plans that can help keep your finances running smoothly if you apply some discipline.
20% off the Top
There’s nothing fancy about the old 20% rule, it simply dictates that you put aside 20% of whatever you have left over in the green at the end of the month. It can take some discipline, but if you think of it like a tax you’ll eventually learn to do without it (and it’s still yours anyway). Shop around for a good savings account to make the most of this money.
Pay Down Credit Cards First
If you are in debt, saving might actually be counter-productive, especially if you are paying interest on credit cards. Aim to pay down the biggest and highest rate balances first before dedicating a significant amount to the savings pot. Online calculators can help you determine the costs of your cards over the long term.
Use Price Comparison Sites
From your TV and internet services to your energy provider, there is almost always a better deal around the corner for those willing to look for it. Get in to the habit of using price comparison sites at least once a year to see if you could be saving money on these common expenses. Remember to take in to account promotional offers and contract lengths.
Consistently Sell Your Junk
This can be hard for the hoarders among us, but if you’re not actively using something – sell it on eBay. Not going to read that book again? Get rid of it. Grown out of that shirt? Sell it to somebody that didn’t eat that tub of ice cream. Old electronics gathering dust? Convert them to cash before they’re completely obsolete. Any money you make can go in to the savings pot.
Don’t Always Drive
If you get on your bicycle more often you probably won’t be able to sell that shirt you grew out of, but you will save on gas. You don’t always have to use the car to travel to work or do daily errands.
Before you can make an effective budget you need to know how much you are spending. This is easy for regular bills, but you will need to spend a few weeks tracking more fluctuating expenses like groceries. Once you have a good idea of what you’re spending now, you can start setting limits.
A big mistake new budgeters often make is to dive right in and create the most water-tight and stringent budget possible. Two months later they’ve already gone over and then give up out of frustration. A good rule is to both overestimate your expenses and overestimate frivolous spending, so you’re always in good standing to have money left over.
Whether you get a budgeting app for your mobile device, use a trusty old spreadsheet on your desktop, or a combination of tools – technology can make budgeting much easier than running around with some handwritten notes and going through everything with a calculator.
Have a Set Amount for Leisure
Going for drinks, eating out, the latest gadget, hobbies and trips – we all need time for leisure. Putting aside a set amount for this each month will ensure you have the opportunity to buy something fun, unwind and take up a few invitations from friends, without overdoing it.
Monitor and Reassess
Just because you’ve made a budget doesn’t mean you should stick to it for life. If you save every month’s figures and itemize as much as possible, you will be able to see clearly where you might be overspending and where costs can be cut. Obviously if you change jobs or another event alters your finances (children leave home), you will also need to reassess your budget.
Even with a budget in place unexpected expenses and other financial emergencies can leave you feeling helpless. Here are 5 ways you can prepare for and ride out the storm.
Use Those Savings
If an emergency does arrive you’re going to be pleased you built that savings pot. Some people even like to build a separate pot especially for emergencies, so their long-term saving goals are never affected.
Although they often get a bad rap, payday loans are an invaluable and perfectly legal solution, such as those offered by ElcLoans online, if you need a quick cash influx to tide you over until your next pay check arrives. As long as you can indeed pay it off within the two week average duration, you will only face a single finance charge and this will be clearly displayed to you before signing any agreement. Payday loans are ideal for those with a bad credit history that don’t have access to other emergency tools like credit cards or a large enough savings pot.
Panicking can lead to rash and sometimes bad decisions. If you are not already in significant debt, you should still have breathing room to get back on top of things. If you’re late with rent you’re not going to get kicked out right away. If you have to cut down on the groceries or leisure, you’ll appreciate the good times even more when you have them.
Don’t Be Too Proud For Government Assistance
If you lose your job you may be entitled to various forms of unemployment benefit. Although this has a stigma, you helped fund it with your taxes and as long as you’re actively looking for work, what’s there to feel bad about? Likewise if you were injured at work, there’s no shame in pursuing worker’s compensation. Those with children, disabilities and other disadvantages are also entitled to various forms of welfare.
You can use regular savings to dig yourself out of a hole but insurance is also wise in case you face something particularly damaging. Income protection insurance or health insurance is ideal if you lose your job. Homeowner’s insurance will cover losses in a fire or break-in. Even cell phone insurance might be worthwhile if you have a particularly expensive device that you rely on.