If 2020 has taught us anything, it’s to expect the unexpected. Many of us have been hit hard personally as well as financially, and amid so much uncertainty, getting a handle on our money has never felt more important.
Give yourself a pat on the back for making it through the year, and taking the first steps to get clued up on your finances to give yourself a better chance for a stable 2021.
- Get planning and create a budget
If you know what you want, but you’re not entirely sure what’s doable, start with a plan. For this, you need two figures in mind: The income you absolutely need to live, pay rent and eat, and the income you need to do all of that and save for your future (whether that be a house deposit, holiday or pension fund).
Splits up your spending into the following respective categories. 50% = Needs (eg rent, food, bills); 30% = Wants (holidays, shopping) and 20% = Goals (eg debt repayments).
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- Limit your spending
During a pandemic it is harder than ever to be ‘good with money’. Take a moment to see where your money is actually going. Break down your non-essential buys from the past three months into three categories: big regret, could do without and no regrets.
It is also important to mastering a frugal lifestyle by having a mindset of living life to the fullest with less. Indeed, many wealthy individuals developed a habit of living below their means before rising to affluence.
- Recite a spending mantra
Create a spending mantra unique to yourself that can help you resist impulse buys, such as:
- Save before you spend
- Wait before you splurge: When you want to buy something expensive but not essential, use the 30-day rule. Postpone the purchase and if after 30 days you still want it, then go ahead.
- Charge yourself a luxury tax: Every time you indulge in some excess spending, put away an equal amount into your savings.
rubies let us know in the comments if you have any tips on how to be financially savvy.