I am a huge fan of financial planning.
And this didn’t come to me easily. The truth is there was a time 10 years back when my credit card bill was way more than what I earned (oh yes and I had multiple credit cards because consumer financing was on the boom and yay I was a banker). But how I overcame all debts and made a no debt rule in my life. Let me share 5 financial hacks that helped me manage my finances in a smart way.
P.S No matter if you are a housewife or a working mom you can use the suggestions as per your need!!!
Budgets are sexy:
Oh yes, they are. Make a budget of your basic expenses by categories (Utilities, Groceries, Medical, Social Commitments, Saving). Keep a cushion for entertainment. Usually, the rule of thumb is 50,30,20. 50% goes to your basic expenses, 30% goes to entertainment and 20% goes to saving/investment. Decide how much you should save directly from your paycheck so that you are saving right from the pie and not the leftovers. You can also set up an automatic transfer on your salary day to your saving account.
Incentivize your budget:
Incentives work great for every age. Even if you are an adult you can incentivize your budget that if you underspent you will treat yourself for a spa day or go out with the family to a place you have been looking forward to. In case you overspend the budget, you will be decreasing next month budget by a certain percentage.
No matter how much you earn keep some funds for an emergency as these expenses can come out of nowhere and hence can be a burden for a salaried person. People also divide saving in 3 categories (saving, Investment, and Emergency Fund).
Pay your credit card weekly:
The rule of thumb for credit cards is either don’t keep one or your pay it every week. I didn’t use credit cards for 10 good years because I knew that spending on credit cards doesn’t give you a feeling of actual spending or cash going out of your pocket and can exaggerate the urge to spend if you like something in the spur of a moment. I started using credit cards again in Canada because it’s important for your credit rating. Now I pay my credit cards weekly in that way I know my limits and don’t overspend.
Passive income or side hustle is a new word. I am a great supporter of that. If you work on multiple streams of income it does not only help you generate extra cash but also helps you spend it the way you want. Passive income can be generated through having a side hobby, investing in funds you like, using your passion to work for others besides your normal 9 to 5 job. I usually set goals to spend my passive income and most of them are travel or experience related. Even if this passive income makes a small contribution towards to travel fund it can make a huge difference while you are planning your next vacation.
So here is my simple expense sheet that I update monthly to see where I am standing in terms of budget and actual expense.
They are so awesome tips. Thanks for sharing