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

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

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

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Key Ideas

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.

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.

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.

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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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.

Budgeting = creating a plan to spend your money

Budgeting is simply balancing your expenses with your income.

It's a plan for the coordination of resources and expenditures. When you budget your money, there’s a desir...

How to create a budget

  1. Gather Some Financial Information: gather a detailed list of your income and expenses.
  2. Select a Budgeting Method: figure out how you’ll budget your money to meet your most pressing financial goals.
  3. Create Your Budget: tally up all your expenses and income to see where you stand and allocate expenses.
  4. Execute Your Plan: you can use a notebook, pen and paper, a spreadsheet or an online software.
  5. Reward Yourself: you can work a small percentage into your budget to treat yourself each month.

The 70:20:10 budgeting method

This method suggests that you allocate 70 percent of your income to expenses, 20 percent to savings, and the remaining 10 percent to debt.

70:20:10 may work for someone with a healthy emergency fund and minimal debt.

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Making the right choice

Handling difficult situations requires taking appropriate measures. When one has issues with the money, there are only two possible scenarios: cutting back on expenses or growing your income.

Managing personal finance

When faced with a challenging situation, as in not having enough money, try to ask yourself which one of the following two you cherish more: time or money. 

Depending on the answer, you will be able to make the appropriate decision: whether to take on a side hustle or cut back on your expenses.