To manage your personal finances with budgeting, the budget itself is not enough – it is imperative you make it work for you. The following section provides you with some important budgeting tips and explains how to make the best of household budgeting and how to use it to balance your personal financial affairs.
Pay yourself first
As soon as you get paid, transfer money into a savings account. Strive to save up 3-6 months’ worth of expenses in a savings account, available in case of emergencies. You can also set up a savings account for other goals you have, like retirement or a down payment.
How to increase income
- Get a second job
- Start a home-based business
- Seek out a higher-paying job
How to reduce expenses
For most people, reducing expenses is a more immediate way to increase their cash flow rather than increasing their income. Start by looking at every item on your budget you listed as a monthly expense. Can any of those items be reduced? Here are some suggestions:
- Consider ways to reduce your housing costs, such as moving to a smaller house or apartment, or taking in a boarder or roommate.
Look at all of your non-essential expenditures, such as cigarettes, coffee, or magazines. (consider buying a coffee maker and a travel mug, and making your own coffee each morning, instead of buying it)
- Try to eliminate credit card debt; pay off high-interest balances first.
The key is to go through every single expense, regardless of how large or small it is and distinguish between your wants and your needs. Can you cut out the wants or decrease the costs associated with the needs? Then, determine how much you can afford to ‘pay yourself first.’
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