Living barely within your income is not a laughing matter! When you are living from paycheck to paycheck, your life is filled with constant stress, worry, and dread. It is a struggle to gain control of your money and your commitments.
How did you end up like this?
For starters, you not be planning for your future and only thinking about the current situation. With this attitude, do not be surprised if you will be working beyond the retirement age! Another reason maybe due to your history of overspending. Perhaps you were spending too much before that you fell into an avalanche of debt and can never move pass it.
In order to cease your worries, a huge turnover can be money flow management. You must give conscious effort to know about where your money flows in and out. Once you have control over your money flow. Then, you will be able to create a systematic financial operating system that consists of: money flow management and budgeting.
Start by identifying your fixed expenses (essentials), variable expenses (non-essentials), and savings (investments) first. Organize these items in a physical ledger or a budgeting App such as EXPENSIFY, MONEYWISE, POCKET EXPENSE PERSONAL FINANCE, and MINT.
Allocating your money to fixed expenses shall be your top priority. Fixed expenses include the goods and services that you cannot live without. Your rent, utility bills, school fees, and transportation costs fall under this category. Since our spending habits and personal needs are different, you must include the categories that are relevant to you. For example, a hand phone is a necessary means of communication. However, the type of hand phone that you bought makes all the difference.
Do you really need the latest Smartphone released by Apple when your current hand phone is working just fine? If you are purchasing it for vanity’s sake then it becomes a non-essential.
Non-essentials or variable expenses include the goods and services that do not compromise your survival. This category includes your clubbing costs, shopping sprees, and overseas vacations. Always save your non-essentials fund for last to prevent becoming broke.
The last category is your savings. Your savings not only protect you from unwanted events but it also prepares you for the future. It includes your investments in stocks, bonds, properties, or mutual funds (items that generate profit). Once your done with your fixed expenses, come up with a well-thought-off amount for your savings that you can consistently maintain.
Some people believe that purchasing a car is considered as investment but in respect to the categories of the “money flow management”, it is not. You see, every time you drive your new vehicle, its value depreciates. It is more of an asset that can sometimes be used as a collateral when you take out a loan.
Always ensure that pay your bills on time, otherwise it will defeat the purpose of the above system. With a smart way of prioritizing your expenses and budgeting your money, you will find yourself in a more stable position in no time!