The ongoing COVID-19 pandemic has hit individuals and businesses hard. Companies have seen revenues and profits plummet, while millions of people worldwide have lost their jobs or had their income slashed. Now, more than ever, it is vitally important to manage your money and manage it well. How do you do that? You start by reading this article.
Managing your money sounds tedious, boring even, but it is an important skill to have about you. Unless you have a net worth of $181 billion like Jeff Bezos, meaning money is no object, you likely need some form of money management going on in your life. Even those who are financially comfortable do their best to live within their means. It would be best if you did too.
Create a Detailed Budget: Fixed, Important Costs
Creating a detailed budget is the first step when it comes to money management. Being aware of where your money goes and when is crucial. Do you find yourself struggling to make ends meet towards the end of the month before your wages are due? Put yourself back in the driving seat and become a favourite, not an underdog in the crazy race of life.
A simple spreadsheet is more than enough to begin your budget creation. List all your income down to the very last cent, so you have a figure to work towards. Try not to list speculative income, including potential bonuses from work, because we are working with a worst-case scenario in place. Only consider your income that is guaranteed.
The next step sees us write down all of our fixed costs and our most essential outgoings. These are costs that we have to pay regardless of anything else. Think along the lines of rent, power, taxes, insurance, and any debt you may have, such as loans or credit cards. These items should always come first because they keep a roof over your head, and owing money to the people or companies involved has severely negative consequences.
Food and Luxury Items Are Where You Can Save Money
Now it is time to log food and luxuries. These items have variable costs and are the areas where you can save some money if needed.
Food is your most important area here. Most people underestimate what they spend on food and drink, which is why drawing up a meal plan is a good idea. Again, list everything as accurately as possible, down to cents if you can. Look after the cents, and the dollars look after themselves, as the saying goes.
Luxury items are things, including television subscriptions, the internet (although some argue the internet is a necessity these days), and other items that you could live without if you needed to.
You may discover you are paying more for certain services than you need to. The last time I created a budget, I found I had both a Spotify and Amazon Music subscription. Both have almost identical libraries, so why pay for both products?
It is worthwhile contacting the companies behind your luxuries and seeing if they can reduce your weekly or monthly payments. They often have special offers, while some offer discounts if they think you will cancel your subscription.
Irregular Outgoings Creep Up On You
Infrequent or irregular outgoings are what catch the vast majority of people out. Almost everyone knows what their main expenditure is, but they forget to factor in the items they purchase a couple of times per year.
If you have a $50 haircut twice a year for a total cost of $100, add this to your budget. Divide the $100 annual cost by 12 and save $8.33 each month. Likewise, consider car repair costs, purchasing cleaning products (everyone forgets to count these on their grocery outgoings), birthday gifts, and clothing. Break your annual spend down into monthly averages, and you will not get caught out when a one-off $400 bill needs paying.
Take control of your finances and regain control of your life.