Three Simple Ways to Overcome Budgeting Struggles
Our spending is a reflection of who we are, and developing positive money habits requires self-discipline. The temptation to spend is ubiquitous, as ads and product placements are everywhere both online and offline. The allure of spending on expensive and luxurious but unnecessary items often irresistible. If you’re struggling on budget, you’re not alone. Though there are simple, but not simplistic, ways to overcome such a struggle.
1. Know yourself and your money
The essence of personal finance is knowing your income and spending. It all starts with yourself: how you see the world, your values, purpose, and goals. Either you’re self-employed or employed, managing your money entails making a reasonable budget method that works and sticking to it. Budgeting involves identifying your needs from wants and allocating an appropriate amount of money for each respectively.
2. Use balanced money formula
US Senator and presidential candidate Elizabeth Warren popularised the “50-30-20 rule” on personal finance when she was an academic. In her book All Your Worth: The Ultimate Lifetime Money Plan, she suggests a simplified formula, a flexible guideline on making a monthly budget.
It goes like this: Calculate your after-tax income and spend no more than 50% of it on basic needs like mortgage or rent, bills, groceries, transportation, education, and healthcare. You should limit expenditures on the things you can live without, or wants, up to 30%. These are entertainment, occasional travels, dine outs and the like. Savings should be your priority, allocating at least 20% of your income and put it in the emergency fund, debt repayment, superannuation, and investment.
It is by no means a perfect formula, but a good start. You can modify it to suit your situation. The most important thing is that you have a blueprint.
3. Focus on long-term happiness
Look at your spending in detail, and identify which items should go next time. Saving is about delayed gratification. Give yourself a break with some incentives from time to time, but focus on long-term happiness. In times of emergency, you might have unexpected expenses, and that’s alright. Get back on track, don’t think it’s the end of the line, and keep going.
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