It's Time to Live on a Budget, Even if You're Financially Secure - Deepstash

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It's Time to Live on a Budget, Even if You're Financially Secure

https://twocents.lifehacker.com/its-time-to-live-on-a-budget-even-if-youre-financially-1843180219

twocents.lifehacker.com

It's Time to Live on a Budget, Even if You're Financially Secure
There are two big unknowns in all of our lives right now: What's going to happen with the COVID-19 pandemic, and what it will mean for the economy. If we enter a post-pandemic recession (or are already in a mid-pandemic recession), what will that mean for our jobs and livelihoods-and what should we be doing financially to prepare?

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Preparing financially for the future

Preparing financially for the future

With the perspective of an economic crisis in 2020, some of us already have to rethink our spending habits to make ends meet. Others may feel more financially secure. But when recessions come, they tend to come for everyone.

We have to start reevaluating our budgets, and possibly start saving as much as we can.

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How to treat your income

Whatever income you are earning right now should be treated like it’s temporary.

Treat your current income as if it might need to stretch for as long as possible. It doesn't mean you need to cut back on everything, but you might need to consider cutting some of your expenses so that you can put more money into savings.

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Saving versus spending

Saving money now is worth more than spending money later. This advice applies to any budget item that you could spend less on now.

Even if it is a really great deal, remind yourself that cash in hand now is worth more than an unnecessary purchase.

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The next thirty days of saving

If you're unsure what you should be doing with your money right now, cut expenses and save every bit of money for the next 30 days. Then, reevaluate.

  • Did you trim as much as you could've?
  • Did you purchase anything you regret?
  • Did you fail to purchase something you should have?
  • How did your budget affect your overall quality of life?

Continue to budget, reflect, and repeat while saving as much as possible.

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SIMILAR ARTICLES & IDEAS:

What a Budget Does

As a personal financial planning tool, a written, monthly budget allows you to plan for how you'll spend and/or save your money each month and also keep track of your spending patterns.

Make a Budget in 6 Simple Steps

  1. Gather every financial statement you can (bank statements, investment accounts, recent utility bills).
  2. Record all of your sources of income.
  3. Create a list of monthly expenses.
  4. Break expenses into 2 categories: fixed and variable.
  5. Total your monthly income and monthly expenses.
  6. Make adjustments to expenses: If you have accurately identified and listed all of your expenses, the ultimate goal would be to have your income and expense columns to be equal.

The cash flow formula

The cash flow formula

The word "budget" is often synonymous with restricted and rigid, making you want to avoid it. Instead, use the term "cash flow."

The formula for cash fl...

Decide how strict you need to be with y our money

Your budgeting style will change over your lifetime. You may use the envelope method when you need to be stricter with yourself.

Some people feel less stressed when they use budgeting styles that track every penny. Others find it is enough to run cash flow and know there's some money left each month for nonessentials. They don't need to itemize where every dollar is spent. See what style of budgeting support your goals and sanity, then adjust as needed.

Know when to stop trimming

Much personal finance advice focuses on making cuts. The information is useful when you're trying to avoid mindless spending. However, there is a time to shift your focus from slashing to earning.

Polish your resume, and apply for open roles that could be earning more. If you're not looking for a career move, a side hustle can help increase your income.

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A Monthly Budget For Your Money

No matter how little or how much money you earn, creating a monthly budget is one of the most important aspects of managing your finances. What gets measured gets managed.

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The Envelope System

The Envelope system is a way to track your variable expenses like food, entertainment, and drinks.

This method, preferably used weekly, allocates a certain amount in each category in labeled envelopes (food, drinks, movies, etc.). Once the envelope is empty, you are done spending in that category.

How to Create a Good Budget

The principles that make a good budget, something you can stick to:

  • Being Realistic: Being too strict is a recipe for failure.
  • Making Adjustments: A budget is not set in stone, but a fluid thing.
  • A Team Sport: If you live with a partner or spouse, you have to agree mutually on how to budget the financials.
  • Expect the Unexpected: Keep an emergency fund, ideally 3-6 months of necessary expenses.
  • Budgeting the Expected: Certain upcoming expenses need to be budgeted in advance, like property tax, holiday shopping, etc.