For many of us, the term “budget planning” can easily spoil our mood. It is often associated with something unpleasant, difficult or simply useless. But we have some little secrets for you, that will make your savings process real and effective, without you having to deprive yourself.
MagicalTip cannot wait to share with you these few secrets that will make your budget not a constraint, but a tool to improve your standard of living. Just read them and apply them!
#1. Method 20/80
Using this schema involves the following actions:
- First, liquidate all your debts and loans.
- Invest or save 20% of your income on an account. It’s money you must never touch.
- Spend as you hear the remaining 80%.
To avoid a failure in the process, it is important to remember this order of priorities: first, we put aside, then we spend. If 20% proves too high for your budget, try to start with 10% or at least 5%. This will allow you to develop a habit and create an initial savings fund.
#2. Method 60/10/10/10/10
In this budgeting method, revenue should be distributed as follows:
- 60% for the main expenses.
- 10% for retirement savings.
- 10% for long-term purchases and payments.
- 10% for exceptional expenses.
- 10% for leisure.
- Main expenses include food, services, transportation, and clothing.
Long-term purchases may be, for example, the purchase of a car, the renovation of the house or the repayment of loans. Exceptional expenses include car repairs, doctor visits, big gifts.
If the debts are very large and the interest is high, it is better to reorient 10% of retirement savings towards this item, until the debt is fully repaid or the financial situation improves.
#3. Tenth method
This method consists of depositing 10% of your income into a savings account. The saving of this amount is relatively insignificant for your budget and has virtually no effect on your quality of life.
The important thing is to put it aside immediately in a savings account, otherwise, you will be tempted to use this money. If you can easily save 10% of your income, try to go to 15 or even 20%.
#4. Half method
This method divides all income into two halves: one for daily expenses, the other to deposit in the bank. When the available money is exhausted, go to the bank and divide the amount deposited in two halves again. The cycle can be repeated if necessary.
It will necessarily remain a certain amount in the bank at the end of the month, because every time the money is exhausted, you save unconsciously. This method is especially useful for those who have trouble controlling their daily expenses.
#5. Method of 4 envelopes
- first, calculate the total amount of your projected income.
- Then subtract the money that will be used for major purchases, and place it on a bank account (between 10 and 20%).
- Moreover, deduct the money that will be used for current expenses (rent, transportation, food, etc.).
- Divide the remaining amount into four parts, and place it in four envelopes, one for each week of the month. You will be able to spend the money of a weekly envelope for any expense (food, entertainment, transportation), trying not to exceed the budget.
#6. Envelope method
The principle of this method is very simple:
- For each major category of expenditure, a special envelope is prepared, with the name and the amount it contains. The categories depend on the peculiarities of the life of each person or family: food, clothing, health, car, transport, entertainment, savings, etc.
- Distribute all your monthly income in the different envelopes. When you need money, take it in the corresponding envelope. If the envelope “entertainment” is empty, it means that for this month you must forget the expensive entertainment. If the envelope “food” is empty, you can take in another envelope less important, and for the next month, you will reevaluate the amount of this post.
- The money that remains in the envelopes at the end of the month can be deposited in a savings account or spent for leisure. It depends on the amount and your financial goals.
Which method do you think is most appropriate for your personal situation? Do you use another? Let us know in the comments!