Today’s money hack is related to budgeting your money.
If money and debt are a problem in your life, the solution is to make a financial budget that will give you control over money and not vice versa. Budgets are plans that accounts for every dollar you earn during a week, month or even a year, and every dollar you spend and save during that period. Overtime, you will notice spending and saving patterns emerge that depict your lifestyle, which you can use to support your money management efforts.
You can budget for the general purpose of better money management, or a long-term goal like retirement or financial independence, or even for a specific event such as a wedding or vacation. Whatever the purpose, the basic idea of a budget is to limit wastage of money and maximize the value derived from each dollar spent.
All budgets involve the same components, yet there are different budgeting methods you can pursue; you can manually create a budgeting spreadsheet or use envelopes to set aside money to cater to different expense categories, or use automated budgeting software for the purpose. You can also include your family in the budgeting process, if they are old enough to understand the importance of frugal living and money management. It all depends on what you’re comfortable with.
If done correctly, the result of a financial budget could be anything from better control over your spending to better planning and forecasting for an uncertain financial future, or even an accomplished goal, such as setting up an emergency fund or saving for the purchase of a house.
Budgeting may sound like a boring task that is only necessary if you are short of money, but the truth is, budgeting is essential for your financial independence goals even if you are not currently struggling between paychecks. Plus, there are different ways you can make it a fun activity. Be sure to check out this detailed guide to financial budgets for more insights on this vital component of personal finance.
Further reading: Budgeting Basics – Budgeting Tips by Investopedia