Why learn to manage money when you have no money? Start with your monthly budget
Many people are working from home due to the recent outbreak, at this time of financial problems, recommend some simple personal financial advice, you can start with a good budget
These tips are from the minimalist financial guide by Peter Mathew
1. Spend less than you earn
The basic skill that underpins your financial freedom is the ability to spend less than you earn. It’s very difficult for a lot of people, but if you don’t do that, you’re not going to get anything.
2. Set a monthly spending plan so you know where your money is going.
Most people, Seek truth from facts says, are too lazy to budget. They may know how much they have left before the next paycheck, and they’ll have it done by then, but that’s not a budget.
Budgeting isn’t just about tracking your spending, though it can be a part of the process.
A budget is telling you where to put every penny you have and how to spend it. In other words, the budget is forward-looking. It’s about deploying your resources in the best way possible, just as an army general plans to deploy troops.
Set up two bank accounts
You should open two bank accounts, or, if you already have one, you should open another.
An account — your billing account — should be a regular, predictable monthly bill from a debit card.
Another account — your expense account — should be your daily expense account. If you withdraw money from automated teller machine, use a debit card to pay for meals, or go to the supermarket every week, these expenses should come from a second account.
Divide the bill account column into three sections: debt repayment, savings, and bills.
In summary, the steps are as follows:
(1) income generation.
(2) write down all your debt payments, savings, and daily bills and add them up.
Put that money in your bill account.
Transfer the rest to your expense account.
4. Plan your month
Budgeting means deciding in advance what you’re going to spend, so the first thing you need to do is pull out your calendar.
Do you have anything special planned for the next month? Maybe it’s a friend’s birthday party, going to the dentist or getting your car serviced. Look ahead and guess how much these will cost.
How many times are you going out for dinner or going out socially? How much does each trip cost? Add them up and write them down.
Do you think you’re going to buy new clothes? Decide how much you want to spend and write it down.
There are apps that can be used to make a budget.
5. Track your expenses
Now it’s mostly electronic payments, and you can track your spending through Alipay or wechat bills.
When you really want to dig into your spending patterns, you can analyze your bills to see what you’re spending more than you’re budgeted for.
6. Weekly review
You can sit down every week and review your performance.
The focus of the weekly review is to keep you on track by forcing you to think about your budget throughout the month, not just at the beginning and end. When things don’t go exactly as planned, you can adjust by paying attention to how things are going.
Distinguish between good debt and bad debt
It is important to define the difference between good debt and bad debt. The definition is simple:
Good debt usually has a low interest rate and is used to buy things that add value.
Bad debt has a higher interest rate and is used to buy things that depreciate in value.
8. Set up an emergency fund
The biggest problem with debt is that it always catches you off guard. To prevent this from happening, you should set up an emergency fund. The money should be safely deposited in your bank account and can be withdrawn at any time, but only for emergency purposes.
You might consider taking a second job or doing odd jobs to save up some money. Don’t be tempted to consume; save them.
Look around you. Do you really need all this? Is there anything you can sell? Collect them all and sell them on used apps.
Next, cut back on your budget and save every penny you can.
9. Debt Snowball
Take a piece of paper and make a list of your outstanding debts, not including your mortgage. It is important to list them in order of increasing the size of the debt. The smallest outstanding balance is at the top, then the second smallest, and so on. Next to each outstanding balance, list the minimum amount you must pay each month for this debt.
Now, once you’ve determined in your budget how much debt you’ll have to pay off each month, you should allocate it like this:
• The minimum amount of payments to be made on all outstanding debt items, except the smallest debt.
• Pay off the smallest debt as much as possible.
Once the smallest debt is paid off, you can continue to pay the minimum amount for the largest debt and then use the balance of your monthly budget to pay off your second smallest debt.
10. Pay yourself first
We should put improving our financial situation first.
What you need to know
Paying yourself first means improving your financial situation
When we pay down debt, including interest, we are making other people, not ourselves, Richer. Every penny will go to them, not us, and that’s no good.
However, debt has to be paid, which is why I still put paying off debt on the “pay yourself first” list. Even though technically it’s paying someone else, it’s actually improving your own financial situation.
Once the debt is paid off, wouldn’t it be better if you could save or invest all your money? Now that you have everything in your hands, work hard for your future success.
When setting a detailed budget, you should put debt repayment first and savings second. Paying yourself first again followed the “put the big rocks in the jar” rule, with the rest coming in second.
2. “Save the rest” never works
Your savings can’t depend only on what’s left at the end of the month, because the immutable law of consumption means you may not have any money left at the end of the month. There’s always going to be some unplanned spending that happens, and the money that goes into things like coffee can add up. Before you know it, your money runs out three days before payday.
So paying yourself first with your budget is a statement of intent. By budgeting to determine the amount of money you’ll save or prioritize paying down debt before paying other bills, you’re declaring yourself the most important part of the overall budget, you put yourself first. This is a proactive, structured pursuit of future financial independence.
3. The savings rate is a good measure of financial freedom
Your savings rate can be used to help you figure out how much of your income you want to pay yourself first, either by reducing your debt or by saving for the future. You’ll see it comes in many different ways, but I prefer to keep it simple.
Add up your total debt service (not including your mortgage) or your total savings, and divide that total by your actual monthly income.
As a rule of thumb, your savings goal should be your age minus 15. If you’re 25 years old, your target savings rate might be 10% . Watch my language. I’m talking about goals — and don’t beat yourself up if you don’t get there in the first place.
11. What to do when you get paid
1. Complete all debt repayments and savings on payday
Paying yourself first means paying yourself immediately after you get paid for your work. For an experienced budget person, it doesn’t matter what time of the month you pay your bills, but if you’re just starting out with a budget, there’s a lot to learn if you want to win easily.
The above dual account budgeting system can help you do this. This way, you can make sure you leave enough money in your bill account to cover all expenses.
For example, if you pay your salary on the 20th of each month, schedule your savings and debt repayment days on the 21st or 22nd so you have a chance to pay it off while avoiding weekends and bank holidays.
If you don’t get paid until the last working day of the month, set your repayment date to the first working day of the second month.
You may not be able to pick a date to pay off your debt, but it’s worth a try. You can try calling or emailing your credit card or loan company to see if they are flexible in this regard.
2. Make the most of every raise
When you receive additional income from work, such as a promotion, raise, or bonus, make sure that the first thing you do is pay yourself first. This means taking some of the extra income and saving it.
You may need to modify existing orders or direct debits to increase them slightly. Remember, if you save 5% of your income now, your savings will decrease as a percentage of your income once your salary increases, unless you also increase your savings.
Every time your income increases, be sure to re-evaluate your savings and debt repayment strategies. After you receive the raise, make it part of your budget for the next month.
At some point, you can even automate the process. Some pension and investment plans allow for automatic annual increases in contributions. You can call the supplier to find out. It allows you to make fewer decisions, and sometimes that’s a good thing.
3. Harness the power of small increments
Over time, small incremental increases in savings can have a significant impact.
Let’s say you save $1,000 a month, or $12,000 a year, and invest that money to grow 5% a year.
12. Hedge against disaster with insurance
You can purchase accident, life insurance, serious illness insurance and medical insurance to deal with life unexpected circumstances.
If you don’t have any money, buy it at a low price. Carefully understand the different insurance situation, make a reasonable preparation
