How do you spend less than you earn and still enjoy life, buying necessary things without hesitation? You can do all this with the slightest desire – control your finances and put aside a minimum sum. To save the deferred money, you can use the method of placing your bills in envelopes. Instead of envelopes, you can set up goals in mobile applications or just a separate bank account, make a deposit (they help to reduce the impact of inflation), and transfer some money into foreign currencies so that it would be more difficult to spend them.
Financial planning is the key to success and productivity. Change your life by starting to do your family accounting in the PocketGuard automated program. It will save you time tenfold and help you learn in the future about unforeseen small expenses that turn into a time bomb at the end of the month and “blow up” your budget, eliminating every penny.
Setting priorities
There is a concept in psychology called “strategic thinking and predicting outcomes”. Thanks to such a technique and your desire, you will manage to save money, if necessary, and build an adaptive strategy that leads to a positive outcome. Ask yourself the following questions:
- a specific purpose – to purchase goods or repay debts;
- representation of the qualitative characteristics of a certain thing and its practical value;
- how much you can save per month;
- planning how to put money into envelopes (how often, how many pieces, and in what sums);
- saving techniques to achieve results.
Financial experts from different countries recommend reserving an amount that can cover your expenses for several months. It is usually two times your salary. For example, you need a limit on money you can spend in emergencies, such as medical care. It will provide you with a financial cushion.
“Envelope systems” and useful habits
There is an interesting way to organize your household budget called the “10-20”. Its essence is to set aside at least 10% of your total income each month. Financial experts advise immediately establishing the purpose of saving. For example, a vacation, a large purchase, or a reserve for a “rainy day”.
“Seven envelopes” is another way of keeping a family budget. You should distribute the money into seven envelopes when you receive your salary. Their purposes may be the following (there may be fewer or more items; everything is individual):
- monthly payments;
- food;
- money for children;
- expenses for essential purchases (furniture, appliances, clothes);
- money for vacations and entertainment;
- savings;
- “joy” – funds left over from the previous month after making obligatory purchases and payments.
It is clear from the names what the family budget is allocated for.
It is necessary to learn to “pay yourself”. In other words, fix a specific part of your monthly income in personal “stabilization funds” or with the help of useful habits:
- Personal pension fund. Here, we allocate 5-7% of the monthly income. You will be very grateful to yourself in the future, 20 years after you decided to save for a secure old age.
- Personal insurance fund. It is your fund to cover various unforeseen expenses. You should allocate 10-15% of your monthly income to it.
- The habit of “purse of greatness” or “piggy bank”. The principle is as follows: every time you need to pay someone, you take 10% of the money from the amount you need to pay and put it in the “wallet of greatness”.
It’s essential to support and praise yourself. We should like the habits we have.
Conclusion
A characteristic of many real millionaires is the absence of the cult of money. They simply go to their goal, and money is just a pleasant bonus for them on this path. Getting rich is an intuitive desire for everyone. Instead, feel it and act on it. We advise you to familiarize yourself with the classic of the genre, “Poor Dad, Rich Dad,” by Robert Kiyosaki if you haven’t already done so.
Install the app in a second, and practice your family bookkeeping skills and automated reports. Your approach will bear fruit without limiting you and your family, either mentally or financially.
Also Read: Tony Zorc: Pioneering the Transformations in Accounting
