I am no expert, but as always, I am here to share things that work for me! Tips for personal budgeting is as subjective as it seems. While a few things are pretty ordinary and necessary, I might be sharing some practical ways which worked well for me. They might work for you or might give you a perspective so that you can customize it according to your needs!
Why am I talking about personal budgeting? I have been the most spendthrift person I know. No, maybe that is my husband. Anyhow, I wanted to make a point, and that is – budgeting was not my thing. I just put a certain percentage in my travel fund, a certain amount for investments, and rest is my liquid fund.
But thanks to COVID19, we are not travelling. And that has made me realize that we actually save more than just the travel fund! We went to a new place or just took a staycation every three weeks. Not only our travel fund has reached a figure it has never seen before, but other expenses like shopping during our trips have also stopped. Similarly, we have stopped going out on the weekends, clearly bringing down our weekly costs by $100-$150.
And this exact thing made me contemplate about the situation here. I decided to monitor my expenses in the COVID19 situation. It is an opportunity to save money, isn’t it? And for many people, unfortunately, saving money is the only option. My heart goes out to those who have lost their jobs. Trust your abilities and the universe, and I assure you, things will be back to normal soon.
So, here I am sharing some tips for personal budgeting which I practised for almost a quarter of a year now and have saved some extra bucks to spend on things I want!
Always work on your income after tax and retirement plan.
Before jumping into freelancing, I always worked for an organization where I received after-tax income. So, I never had to keep this aspect in mind. But as a freelancer, I make sure that you keep aside my taxes before spending my money. Tax calculations depend on your country and usually well defined for freelancers. Similarly, make sure to set your funds aside for your pension funds or 401.
Keep aside 50% of your income for needs and necessities.
Go easy on yourself! I had colleagues who would keep aside 40% for their basic needs and thus every other thing – thanks to cravings and impulsive shopping fits – would seem like a luxury. And trust me, I know, more saved money means more spending!
Your basic needs include:
- Rent/ Mortgage
- Minimum loan
- Utility bills
- Variable pays like entertainment, personal care etc
If 50% of your household income covers this, great.
What to do with the rest of the 50%? It’s entirely up to you. Set aside 20% for loan payments. Put a fixed amount into your emergency fund every month. Put some more for your savings.
How do you do that? This is when this budget planner from pigly.com might come handy. Just enter your net-income and the range of desired expenses, and you have the numbers with you.
Analyze your expenses and then evaluate where you can save some money
Now it might seem taxing, but it’s not. Just gather your few monthly statements of your bank, credit card, past few bills of your grocery shopping and just understand your expenses. Trust me, it’s not that difficult.
Now you know where you are spending. Evaluate what is right for your health first. Yes, you might need soda to function, but are you sure it’s not in excess? Or maybe you don’t need to smoke that extra box of cigarette. I won’t tell you what are bad habits or to give up your habits, that is your self-talk. But yes, you can always evaluate.
I found this dashboard pretty interesting. My husband and I are not chain smokers, but we do share a conversation over a cigarette twice or thrice a day. I am not very proud of it, nor do I endorse smoking. But, if you are looking to quit, this dashboard might motivate you to quit smoking!
Not pretty big but I am sure there is a better use of the $600 you save in a year!
Or you might just realize that if you brew your own coffee, you can easily save a $100 per month. The opportunities are immense.
One of the best tips for personal budgeting: Don’t live off a credit card. Not at all!
Credit scores are necessary. But that doesn’t mean you put yourself in unnecessary debt. I use credit cards for my absolute needs and necessities. I don’t buy anything and everything just because I have a credit card. And it’s a habit I have consciously taught myself. It’s super enticing to indulge when you have a rewarding credit card but trust me, you don’t want to see yourself in some bad debts in this unpredictable world!
Let your money talk! Set goals – immediate and long term
Always have financial goals defined. They can be immediate ones as buying a car or some long term goals like buying a vacation home by the beach or travelling the world without worry! Calculate the number of deposits needed to achieve that based on your timeline. Or maybe determine the time to make your goal based on your income. But do have some goals in mind. This Pigly dashboard can help you do that!
I really hope that these simple tips for personal budgeting helped you in giving a perspective!