Do You Live Paycheck to Paycheck?
Have you ever wondered what happens with your money?
It can be discouraging when you work hard every day, possibly even have multiple jobs, and still are not satisfied with your financial situation. However, you're not alone! Recent data shows that many people are living paycheck to paycheck. Recent data shows that between 55% to 63% of people have no money left after paying their bills. But don't worry, there are ways you can improve your financial situation.
To start managing your finances, begin by reviewing your monthly bank statements. It will help you distinguish your fixed expenses from variable ones. Fixed payments, such as mortgage or rent, utilities, and insurance, are usually the same each month. Knowing this is a crucial first step as it allows you to estimate how much money goes out of your account each month. Once you have identified your fixed expenses, you can focus on adjusting your variable ones, such as food, clothing, and travel, and better manage your budget.
It is very important to understand expenses and how you spend your money. One way to achieve this is by categorizing your bills. There are different methods to do so, but it is recommended to categorize your expenses into three groups - needs, wants, and savings/debts. Doing it will help you realize that spontaneous purchases at your favorite store may cost you more than you think.
Since you completed two previous steps, it is time to create the budget. Knowing how much income you are expecting to receive and how much spending you have planned is empowering. The NerdWallet recommends using the 50/30/20 budget. Divide your net income into three categories: 50% for needs, 30% for wants, and 20% for savings. Sorting your expenses into needs and wants can help you organize your budget and prioritize spending, especially if you need to trim costs to make room for savings or debt repayment.
Managing your finances can be a cumbersome task if done manually with pen and paper. However, in today's digital age, there are numerous apps and websites available in the market that can assist you. While some of them are free, others may charge a fee for additional services such as linking your cards. I recommend exploring and choosing the one that suits your needs the best. Once you have found the right tool, create a budget and take control of your finances with ease.