Money management is no rocket science. Neither is it the hegemony of professional financial advisors, anyone can do it! But to stick to your plan requires tailoring the plan as per your capabilities and a monk-like discipline. Most people that struggle with saving money are usually victims of bad money habits.
Wait! Calm down! Before you get all riled up for calling you out, take a look at the following list and identify if you have any of the listed bad money habits.
- Spending more than you earn
- Consequently, Racking up credit card debt
- Over-spending on non-essentials
- Shopping out of boredom
- Not setting up a fund for emergencies or for your future
- Delayed payment of bills
- Not educating yourself regarding personal finance
- Not putting aside some funds for investing
But amongst all these, the cardinal sin of money management is living above your means. And that usually is either a result of playing the comparison game or being blissfully unaware of your spending. Rather than keeping up with the Joneses, let your budget alone be a metaphorical north star in the journey of improving your spending and saving habits.
Let’s learn the basics of creating a monthly budget.
How to create a monthly budget?
One of the best habits to help you live below your means is to develop a monthly budget. Knowing how much you make in a month, a little bit of introspection into your behavioural patterns, and identifying your essential and non-essential expenses will go a long way in ensuring a steady growth of your savings account. Follow the 5 steps of building a healthy budget plan.
- Calculate your monthly income
- Observe your expenses and spending patterns for a couple of months
- Set your financial priorities
- Build a budget rule
- Keep a track of your budget and make refinements.
While most points in the budget plan are self-explanatory, let us elaborate a bit on what is a budget rule. A budget rule is a rule-of-thumb method of allocating your income towards various categories of spending. One of the most common budget rule is the 50/30/20 rule. According to this, you must allocate
- 50% of your income for your needs (the absolute must-haves)
- 30% for your wants (non-essential spending)
- 20% for your savings and investments.
Having a plan for where and how to allocate your resources is important, but it is equally important to spend wisely. It’s unlikely to optimize spending in the absolute must-haves category and unwise to reduce the allocation of resources for the savings category. So, that only leaves out the non-essential spending. According to a study by Arabian Business, out of 500 UAE respondents, about 60% claim that post-covid they no longer spend as much on non-essentials as much as they used to.
Hundred can help you save more on your non-essential spending with the use of offers and deals. Use discounts, cash backs, rewards, and complementary offerings by various cards and independent merchants to save more on every purchase.
Want to know more about how to reduce your daily expenses using Hundred? Click Here