Our constant needs to shop, eat and maintain a certain standard of life. This standard keeps increasing each year, so does our money consumption level. However, with time, the need to save money for the future becomes imperative. Inevitable mishaps occur to indicate to us that we are not saving enough.
If you are often experiencing financial difficulties, then maybe that is a clear sign that you need to change your habits.
What are considered living expenses - housing, groceries, transportation, and clothing?
If you’ve ever tried saving money, then you know that suddenly every single penny spent seems essential. However, spending is often a habit. And to break it, we need to be clear about the categories of regular expenses.
- Housing: for all the frequent or rare housing repairs
- Groceries: from lunch at work to dinner plans
- Transportation: choosing affordable transportation
- Clothing: try spending less on clothing and cut on unnecessary items
Make a list
Now that you know the categories, you should make a plan. Having a clear plan will help you achieve your goals.
It will also show you the things you can go without and how much you can actually save if you follow your plan.
Be More Practical
The thing about money-saving skills is that you need to be more practical while making purchases.
If you have been experiencing financial problems and difficulties, it is normal to start looking for ways to budget your income more effectively.
The 50/20/30 Rule
The 50/20/30 rule can mark the beginning of your financial literacy. According to this rule, introduced by Senator Elizabeth Warren in one of her books, expenses can be divided into three categories - Needs, Wants, and Savings.
Needs cover all necessary expenses such as credit card bills, utility bills, and others. Therefore, around 50 percent of your income should go towards your primary needs.
Savings are a popular way to spend money. Investments are related to savings when you are depositing money in a bank or into mutual funds and other government bonds for a good return on investment. Therefore, about 20 percent of your income should go to savings.
Wants are everything you want but not necessarily need. For that, Elizabeth Warren suggests we spend approximately 30% of our income.