Do you have a budget plan this year? If not, now is the time to start one!
The truth is that budgeting is the best way to keep your spending habits under control and guide you to achieve your financial goals. Here are three ways to save money this year, whether you are aiming to invest, buy your dream home, save to travel, or give your wardrobe makeover.
Pay Yourself First
Pay-Yourself-First budget is one of the most flexible options out there. Rather than saving based on your current expenses, you can budget based on your financial goals. To achieve this, determine how much you spend each month. Then decide on your saving goals. Once you figured out both, then you can decide how much you can afford to set aside. For this budgeting strategy to work, you will need to set aside a reasonable and realistic amount of money for savings.
50/30/20 Method
The 50/30/20 method is a popular tried-and-tested budgeting strategy. This budgeting method from Mr Kimpton, the Chief Operating Officer and Personal Finance expert at Family Money note that to use this method you simply divide your monthly income into three spending categories: 50 percent for needs, 30 percent for wants and then the remaining 20 percent is for your financial goals. Mr Kimpton also shared that 50 percent toward needs includes essential outgoings such as rent, mortgage and bills. 30 percent are for wants such as hobbies, shopping, or subscription and lastly, 20 percent can be used for financial goals such as paying off debts, making investments or contributing to savings.
The 50/30/20 method is the most effective because it allocates spending based on the most pressing needs. The 50/30/20 is simple for beginners to learn because there are only three categories to keep track of.
Cash Envelope Method
Cash envelope budgeting works exactly like it sounds like it would. This method allows you to clearly visualize how much money you can spend per expense category. You begin by analysing how much money you would like to spend on essential and non-essential items and then separate the cash into envelopes designated for different sorts of spending. When you need to spend money on a specific category, you can only use the money from that envelope. You can always have enough money for what you need by being precise about how much you spend in every category.
Sources:
https://www.express.co.uk/finance/personalfinance/1543614/2022-budgeting-503020-debt-savings
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