When you’re living from one paycheck to the next, saving for retirement or emergencies might seem impossible. Yet, you don’t have to put away large sums of money at a time to make progress. Every little bit helps. Here are three ways to work savings into your financial plan, even when money is tight.
Building an emergency fund into your budget can protect you from financial disaster and crushing debt from unforeseen circumstances, such as a car breakdown, unemployment, or a health crisis. Experts recommend saving enough to cover up to six months of expenses. That number might initially seem daunting, but focusing on these three key aspects can help you succeed.
Setting up a budget is essential to getting finances in order and keeping them there — as long as you stick to the plan. Using a spreadsheet to outline line-by-line expenditures might work for some people, but there’s a simpler way to keep track of inflows and outflows. The envelope method is an effective way to track physical cash.
A sinking fund is a tool to save money over time for a big purchase in the future. You create a line item in your budget for the expense, like a vacation, car, or down payment on a house. You “sink” a bit of cash into the fund when you get paid. Eventually, the money accumulates, and before you know it, you’ll have the means to afford the planned item without experiencing a massive impact on your monthly financial obligations.
Everyone’s budget contains two types of expenses: fixed and variable. While you might have little control over bills set in stone, the others are a bit more flexible. Groceries provide a great example of an expense with considerable wiggle room. Here are several ways you can get the most out of your shopping trip while saving money on food.
Working to get your finances in order can be a challenge. Building a budget, accounting for savings, retirement, emergencies, and increasing prices might overwhelm even the most financially savvy individual. A spending freeze could be just the thing to get you back on track, but how?
While budgeting money might sound restrictive, it could be the answer you need to straighten or keep a handle on your finances. Zero-based budgeting categorizes a person’s income into expense pockets to cover their obligations and accounts for every dollar.
Debt can be a double-edged sword. On the one hand, you can use it to buy appreciable assets and grow wealth. However, acquiring the wrong kind of debt can sink your whole financial plan, leaving you worse off than where you started. In a climate where inflation shows no signs of slowing down, you need to know the most damaging types of debt and why you should steer clear.
Knowledge is power. That phrase applies to every aspect of your life and certainly holds true for your financial well-being. In fact, the more mindful you are about making, saving, and investing money, the less likely you are to struggle with your finances.
Perhaps you already have a budget set up to list your income and bills so you can track where your money goes each month. Unfortunately, traditional budgets can keep you from reaching your ultimate goals because the focus is on paying the bills and not reaching your life’s desires — enter reverse budgeting. Instead of simply having a goal to pay the bills and maybe have a bit left over, plan out your financial goals first and work on your budget to help you get there.