Do you find yourself spending more and saving very little? Are you often in need of money and wonder where your income for the previous month has gone? You are not alone. Almost everyone has been in this predicament more than a few times.
When you regularly find yourself in this situation, it means you have some spending leaks. Therefore, you will have to identify these leaks and stop them. This short piece will show you how you can do so. Keep reading.
Budget your income
Splitting your income is a good way to keep track of it. You can use the 50-30-20 rule to find out where you have a budget leak. Here’s how it works: Once you receive your income for the month, set out 50% of it for essentials like food, transport, and bills; 30% for tasks you want to achieve and debt payments. The remaining 20% should go to your savings.
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The hard part is to record what you spend each day. But nothing will get past you when it’s time to analyse your budget at the end of the month.
Monitor your spending
Most times, it’s the little things that add up to cause the greatest impact. Things like buying meals rather than cooking, and spending more than you should on snacks and internet data purchases can take up a large chunk of your income yearly.
- Emotional spends and the latte factor: Before you spend, ask yourself if it is really worth it. We often times buy things or pay for subscriptions we never get to use or use once and abandon. Also, habits like smoking, drinking daily, or playing bets can add up to a huge expense at the end of the month. The latter is known as the latte factor, where you make seemingly small and insignificant spends every day. It is best to cut down on certain inclinations if you want to save more.
- Wastages: you will spend more on electricity bills when you leave energy consuming gadgets on unnecessarily. Turn off the light, air conditioning, or the TV when you leave the room to save up on your bills.
Your car is another thing that can consume a large part of your income. When you keep your car in good shape through regular maintenance, you not only ensure road safety but also reduce your spending. Driving at low speeds and keeping your leg off the clutch while driving help reduce fuel usage. If you are going to stop for more than a few seconds, turn off your engine.
Find out other areas of income wastage unique to you.
- Make a shopping list and keep to it: To avoid spending on impulse, plan your purchases and create a shopping list before you enter the market.
the end of the month, compare the amount you have budgeted and the amount you have spent. If you have spent more, reanalyse and decide if you made your budget unrealistic. If not, find areas to cut back on.
The road to wealth requires mindfulness. You may make a lot of money every month, but what’s the point when you don’t spend it wisely? Avoid financial leaks as much as possible. Save and invest more.
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This article was written by Tobenna Nnabeze