With rising prices and ever increasing consumer demands, it becomes more challenging for many individuals to live below their means. Credit card bills, keeping up with the Joneses, and other unnecessary expenses are among some of the reasons it is exceedingly hard to stick to a budget. Some find themselves unable to spend less than the amount of money they are able to make each month. Here are a few suggestions to help you live below your means and improve your financial health.
Most believe that the purpose of budgeting is to make sure you have your finances in order. You take what you make and from that, you monitor what you spend. Many try to find out how to reduce their expenses by as much as possible. Is that the best way? Some say buying quality over quantity is more cost-effective. The ‘Buy Once, Cry Once’ mentality in budgeting may cost more upfront but can save you a ton in the long run.
What is the ‘Buy Once, Cry Once’ Mentality?
Buy once, Cry once simply means valuing quality over price. It means that you can purchase something one time, and it will withstand the test of time. I understand the importance of cutting corners here and there to save a buck. I used to be that type of person. But the ‘Buy once, Cry once’ mentality is now ingrained in me.
For example, instead of buying a cheap, poorly made winter jacket for $20, look at purchasing something from a quality brand. Yes, it might cost five times as much, but chances are it will easily last you five times longer. Additionally, you’ll be happier with it in the end.
Another example would be buying an expensive cooler. Many high-end coolers have recently flooded the market, but the appeal in them comes from their longevity. You buy one of these coolers once (cry because of the high price) and you never have to purchase another cooler again.
Buy Once, Cry Once Mentality in Budgeting
So now that we have wrapped our heads around the ‘Buy once, Cry once’ mentality, how does it fit into budgeting?
If you ascribe to this mantra, then you know your budget is going to take quite a hit. After all, paying for quality is not a new idea. In terms of budgeting, you should plan on this expense being a once a year expenditure. For example, if you are buying a new winter coat, allot yourself extra money around the November/December time frame in your budget to accommodate the extra expense.
Think of it this way, a one-time expense for a quality item can easily turn out to be a better value over time than having to budget to purchase that particular item, of lesser quality, on a yearly basis.
How to Get Quality at a Lower Cost
Even though you are going to spend more upfront with this approach, you can still find quality at a decent cost. Just because you want to buy quality products does not mean you have to buy the most expensive option. You can save a lot of money by doing some research before you spend anything. Compare product reviews and shop around for the best deals. Depending on what you are shopping for, you can likely find excellent deals with seasonal offers.
Another way you can stretch your budget is to find second-hand items. With online marketplaces and sales becoming more active than ever, there is a good chance you can find used products for a great price. If possible, take some time to explore used options before you blow your monthly budget.
Shifting your mind to purchasing something based on quality over price can reap many financial benefits in the future for oneself. The ‘Buy once, Cry once’ mentality in budgeting may be hard to grasp at first, but once you do I can assure you that you’ll ultimately be satisfied. By creating a free monthly budget, you too can be on your way to financial independence.
Budget Smart, Invest Wise
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Only 32% of Americans maintain a household budget.
For many of us, when it comes to finances, we tend to bury our heads in the sand. Analyzing how much we spend is only going to end in tears, right?
In fact, the opposite is true. Utilizing effective budgeting can actually help us to save money, and even leave us with more money to spend on those things we never thought we could afford.
Read on as we take a look at how to create a budget.
1. Work Out How Much You Earn
The first step is to work out exactly how much money is coming in.
It’s essential to make sure your budget depends on your take-home pay, rather than your gross earnings. Take a look at your payslips to see precisely how much money is coming in once taxes and other contributions have been taken out.
If you have any other sources of income, such as a side-hustle then make sure you include this money in your earnings too.
2. Work Out How Much You Have
As well as your earnings, you may also already have some money set aside.
Depending on your circumstances, you may want to leave this amount aside as your rainy-day or emergency fund. If you have outstanding debts, however, then it may be more cost-effective to use some of your savings to pay these debts off, rather than continue to accrue interest on them. If you have several sources of debt, it may save you money to consolidate your debts by taking out a loan.
3. Work Out Your Outgoings
Just like any debt repayments, you will then need to factor in all your other outgoings.
The largest outgoings are typically for housing costs, transportation, food, insurance, and healthcare. You can work out all of your regular outgoings by taking a look through your bank and credit card statements. Some of these outgoings may vary from month to month, such as your food bills, so the simplest method is to budget for your most expensive month, which will give you plenty of wiggle room.
If you have expenses that weren’t that necessary, then eliminating these from your budget will free up some cash to accommodate other bills.
4. Work Out Your Financial Priorities
Subtract your outgoings from your earnings, and you’ll have an idea of how much you have leftover each month.
If the result is negative, then you’re spending beyond your means. There are two things to do in this case: stop spending so much or start earning some more, by taking on other work or selling some of your unwanted items.
If your result is positive, this is where you have decisions to make. You may decide you want to put this money aside to build up some savings. Or you may want to put it towards paying off debts or use some of it on eating out now and again. Whatever you decide, by setting out exactly what you’re going to spend each month, you will find yourself far less likely to splurge on unnecessary things and will be able to take control of your finances.
Even Effective Budgeting Needs Wiggle Room
Effective budgeting is great, but it doesn’t take into account emergencies or one-off increases in your outgoings.
There could be situations when you need to cover something that you haven’t budgeted for and that doesn’t mean that your budget has failed. You can always think of borrowing money, provided their repayments are easy to work into your budget. Happy New Budget to you!
Image source: Gotcredit.com
The older I get I find myself spending more and more money each weekend. Between eating out, going out for drinks, and other activities, many weekends sometimes turn into a money pit.
Whether you are an adult or kid, most Americans love celebrating Halloween. While many kids focus on their candy hauls, adults usually have a party or celebration to attend. Between purchasing candy, pumpkins and a costume, Halloween can get expensive quick. I’ll share a few budget friendly Halloween costume ideas for this upcoming year.
JAKE FROM STATE FARM
Most of us are familiar with the humorous State Farm commercials featuring a guy named Jake. Jake is on the phone with a client when he is asked by the guy’s wife who he is. Needless to say the costume is a cultural icon and can be made very cheap.
All you need to complete the outfit is a pair of khakis, a red polo, and outfit it with a name tag. Just like that you have a budget friendly Halloween costume. It takes nothing more than simply rummaging through one’s closet to find the necessary items.
Do you hunt or know someone who does? If so, dressing up as a hunter can be an easy budget friendly Halloween costume idea. All you need is some hunting clothing, a little face paint and a toy gun or bow to top it all off. When it’s all said and done you can complete this ensemble for the price of the toy, but you might even have that as well.
Nothing screams Halloween more than the classic costume of a ghost. While it isn’t the fanciest option, it is a timeless classic that many will be able to relate with. Do you have an old white bed sheet laying around your house? If so, then you have a costume idea.
Simply take the bed sheet and cut some holes in it for you to see through. You can also go ahead and cut a slit out for the mouth as well and complete with any additional accessories you see fit.
Halloween doesn’t have to be an expensive holiday like most have become in recent years. Some families have many kids to dress up for the festivities. That can become quite expensive. It’s a time for kids to be kids and enjoy satisfying their sweet tooth.
You might even be able to recycle a friend’s old Halloween costume he or she wore last year or many years ago. Do you have any additional ideas for budget friendly Halloween costume ideas? If so, comment below and share.
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Rents have been steadily increasing throughout the United States over the past decade. Ever since the financial crisis, people have somewhat shied away from home ownership and opted to rent. With the demand for rentals on the rise, a sharp increase in monthly rents has been a clear side effect. The old rule of thumb used to be 30% of one’s income should be spent on rent; however, we are now seeing a burden like never before. What should a millennial spend on rent? The simple answer is as little as possible.
Millennial’s are those born from the late 1980’s to the early 2000’s depending on who you ask. These individuals tend to have a high burden of student loan debt, which makes it all the more concerning that they are spending high amounts on their monthly rent. A recent report came out showing that millennial’s will spend close to six figures, yes, $100,000 on rent before they turn 30. That is a staggering amount considering that most are also in the process of trying to pay off student loan debt.
3 WAYS TO NOT SPEND 6 FIGURES ON RENT BEFORE 30
- Get a roommate. Sharing a two bedroom with a friend is a simple and easy way to save money every month. Sure two bedrooms cost more than a one bedroom, but when you split it two ways, it comes out to about a 30% savings versus living on your own. This isn’t a long term solution, but it is a good way to free up additional income every month.
- Move in with a significant other. While some will shy away from this advice, there are many benefits to doing so. I knew a couple who had to live apart until the day they were married for various reasons. They chose to do this in order to respect the wishes of others. However, they were basically spending an extra $1000 a month on an additional apartment that got little to no use, all to please a few. They could have used that money to build up an emergency fund or increase their down payment on a future house.
- Buy a house. While buying a house requires more responsibility and obligations than renting, it is also a good choice to lower your monthly expenses and build equity. For example, a $200,000 loan on a property with 20% down will give someone a monthly payment of approximately $1250 a month. Depending on the area of the country you live in, it will almost certainly be cheaper than paying someone else to rent.
While some see a benefit to renting, there are also many drawbacks financially. Although we can’t exactly put into numbers what should a millennial spend on rent, there are ways to reduce your monthly expenses. Whether you are able to implement one of the solutions above into your situation or not, living costs will be your largest expense every month.
Budget Smart, Invest Wise
Spring is finally here, regardless of whether it feels like it outside or not. Around this time of year, many see it as their obligation to go through their homes and rid themselves of unnecessary items that clutter the place up. The idea that a clean and happy dwelling is a rebirth and a new start. Why not take this same approach to your finances?
At the start of every calendar year, I always suggest creating a new budget for the upcoming year. Mapping out your income and expenses presents saving opportunities and fiscal responsibility. We are now almost three months into the new year and expenses sometimes change. That is why I always do a financial spring cleaning. Below are my favorite three ways to do a financial spring cleaning:
Financial Spring Cleaning Tip 1: This first tip is directly related to a normal spring cleaning of the house people already do. Go through your closet and determine which clothes you don’t need anymore. Maybe you have shoes you don’t wear, pants you’ve outgrown, DVD’s you no longer watch because of a Netflix subscription. Or a lot of cravats and bow ties that are now out of style, or men’s bracelets that you aren’t using any more.
Gather up these items and donate them to a local shelter like The Salvation Army. Not only will you eliminate these useless items from your place, but you will be giving to those who could benefit from such items. The best part about all of this is most of the times you can receive a tax deduction for your donations. This can lead to a higher income tax return for the 2017 year.
Financial Spring Cleaning Tip 2: Clean out unnecessary clutter in your budget. For example, maybe at the beginning of the year you signed up for a gym membership you no longer use. Cancel it. Go through the various categories in your budget and see if they are relevant to the remainder of the year going forward. Perhaps you dedicated a portion of your budget to pay off debt, but now you no longer have that debt. Eliminate that category. Eliminating categories in your budget makes it simpler and much easier to read and track.
Financial Spring Cleaning Tip 3: Review the dollar allocations in your budget. Say at the beginning of the year you were eating out lunch every day, but now you realize the many health benefits and cost savings of bringing your lunch to work. See if you can slash $30-$50 a month off your food budget. Shop around for car insurance. Perhaps you find the same coverage with a different company for $15 less a month. Eliminating a little bit of money from a few categories adds up and helps boost your savings potential.
Financial spring cleaning allows you to revamp your finances for the remainder of the year. Even if you haven’t done a good job of sticking to your budget, it is never too late. A financial spring cleaning can allow you to set up your financial priorities for the remainder of the year and gives you a clear financial conscious heading into the spring and summer months.
Nearly three out of every four students graduating from a four-year college or university will have some sort of debt. Despite the fact that college is supposed to be some of the best years of your life, paying off your student debt after you have graduated can seem like a mountain too big to climb for many.
According to a recent Forbes article, the average student graduating from college has over $37,000 in student loan debt. This number is expected to continue increasing due to the constant hikes in college tuition throughout the United States. Whether you have graduated or are about to graduate from college with debt, there are ways to help you manage the financial burden.
Example 1 on How to Pay Off Student Debt:
Susie went to a four-year state school. Fortunately, she had academic scholarships to help pay for schooling, and she also lived at home during the four years. She graduated with $10,000 in student debt. Susie was able to get a job right after school in the town where she went to school and where her family lived. She continued to live at home and made a budget. Susie focused on keeping her expenses low and used every bit of extra money she had left over in her budget to pay towards her loans. Most importantly though was that she included a category in her budget for paying off her student loans each month. She devoted $500 per month towards her student loans. Because of her frugal living and her devotion to get out of debt, she was able to pay off the entire balance of her loans in less than two years!
Example 2 on How to Pay Off Student Debt:
After graduating high school, Chris decided to attend a private university to continue his studies. The tuition at his university was expensive, but with the help of aid and an alumni scholarship he was able to limit the costs. Regardless, Chris graduated with $45,000 of student debt after it was all over. Chris accepted a job with a non-profit after graduation. Even though he wouldn’t be making much money, he felt a calling to do something he passionately cared about. Because of his situation, a high amount of student debt and a low salary, he enrolled in an Income Based Repayment Program. This allowed Chris to avoid the high monthly payments his loans would typically have required him to pay and instead allowed him to pay a small percent of his income every month. Even with this program, Chris still had to create a budget, but the repayment of his student loans was not as high of a priority as it was for Susie. Nonetheless, Chris was able to still live comfortably, doing what he loved, while also meeting his student loan obligations.
The examples above illustrate a couple of real-life situations that people face when paying off student debt. To some, paying off the debt is a very high priority. To others, not so much. Only you can decide how quickly you would like to pay off student loans. The commonality that both Susie and Chris shared in both examples was that they created a budget. Susie created a budget that allowed her to aggressively pay off her debt. Chris created a budget that allowed him to live within his means but also meet his payment every month. Regardless of which category you fall in, creating a budget is a great foundation to tackling any debt, especially student loans.
With the new year in full swing, people are doing their best to stick to the freshly made New Year’s Resolution’s they mapped out for themselves. The most common resolution always seems to be losing weight. Instead of going with the status quo resolution this year, why not try to trim something else? Your budget perhaps?
How to cut my expenses? Is a question often asked by many in order to free up funds in their daily lives? Maybe they are living paycheck to paycheck, maybe they are trying to save up money for a special purchase, either way trimming your budget is the best way to go about doing this.
For starters, you need to have a budget. You can download a free budget template and simply put in your income and expenses. The best part about budgeting is you get to see where your hard-earned money is going every month. Perhaps you are spending a large portion on eating out, can you bring your lunch instead of going out to eat? If so, you might be able to not only cut some expenses but trim your waistline also.
The free downloadable budget allows you to choose the expense categories you have for a given month. Say for example you spend $100 a month on your cellphone bill, can you change service providers and possibly get the monthly expense down to $80 per month? If so, you have freed up $20 per month or $240 for the entire year. Can you trim $10 a month off your grocery bill by purchasing generic products versus name brand? This can be an additional $120 in savings for the year. Attempting to save as little as $10 to $20 per category for a few of your monthly expenses can add up to some awesome end of the year savings.
Below is a quick easy way to trim your budget:
- Create a budget: If you don’t already have one, now is the best time to start budgeting. This will determine where you are spending your money every month.
- Track all of your expenses: See just how much you are spending in the various categories every month. Some may surprise you.
- Pick 2-4 categories: By selecting a few categories where you think you can cut some expenses you will maximize your yearly savings.
- See how much you can cut: It can be $5, $10, $20 or maybe even more per category per month. Living on a little less each month won’t change your quality of life for the worse. Instead, you can use the money saved to enhance it by saving up for a vacation or a future purchase.
- Don’t incur new expenses: While trimming your budget to save up money is the ultimate goal, don’t incur new expenses during the process. A car payment or a gym membership will quickly eat away at the money you are trying to save.
Stick to it: Trimming your budget will only be beneficial to your wallet if you stick to it. Developing discipline for sticking to a budget can be tough but also very rewarding.
Budgeting is an essential part of taking control of one’s financial life. You would be surprised to know that nearly two out of every three Americans do not budget their income.
With today’s technology, it is now easier than ever to track your income and spending. Personally, I use Google Sheets to budget. I have the ability to access my budget on any computer with internet access along with my smartphone. Another great way to budget is through Mint.com. Signing up is free, and they have an app so you can update your budget on the go.
Now that you can see just how easy it is to start your budget, I will quickly lay out why you want to budget and the benefits.
- You know how much you make: Ask someone how much take-home income they have in a given month, you would be surprised the number of people who can’t give you a specific dollar amount. Knowing how much you make is vital in determining how much you can save and spend.
- Plan Purchases: Saving up for a vacation? By budgeting, you will be able to determine how much you need to set aside each month so you and your family can enjoy a getaway.
- Eliminating Debt: This can have a two-fold benefit. Firstly, if you know how much you make, then you know how much you are able to spend, thus you can avoid spending more than you make. Secondly, budgeting can help you set aside income every month to tackle debt, be it student loans, a car note, etc.
- Enjoying your money: Budgeting allows you to feel confident about your spending habits. It allows you to plan for purchases and should limit financial stress on your life by worry about how you are going to pay for something.
This is not a comprehensive list of the benefits, but a few of the major ones. If you are curious about the benefits you can receive from budgeting then give it a shot if you haven’t already.
For more on this, consider checking out The Finance Twin’s article on how to make a budget. It’s a good solid read.
Budget Smart, Invest Wise