According to a recent Federal Reserve Board Study, “53% of respondents indicate that they could cover a hypothetical emergency expense costing $400 without selling something or borrowing money.” This means that the rest of the 47% of respondents would not be able to cover that $400 without selling something. This is a common problem for people today and here are a few tips on budgeting and saving that can help your personal finance.
1. Don’t fear looking at your account
Don’t fear looking at your bank account! Have you ever had that dreaded feeling of going into a grocery store and fearing that you don’t have enough money to cover the cost? Not having enough money to purchase that little bag of Skittles you’ve been craving all day, can become a little tiresome. Sometimes it’s inevitable for college students or younger kids.
Looking at your bank account will not only help you with keeping track of your money, but it will also help prevent any overdraft fees. To really understand how much you are spending, look at your bank account over the course of a month to get a better idea of how much you are spending. This leads us into second tip.
2. Three category budget system
Use the three category budget system. This is a very effective budgeting method and extremely simple. After using TIP #1 (Don’t fear looking at your bank account), you can now analyze your spending habits. Map out the three most common expenses within your month of checking your bank account. Typically the three most common expenses are food, clothing, and entertainment. Which ever case you may be in, take those three categories and cut the spending by 50%. Place the remaining 50% of that money into one of your savings accounts Again, this type of budgeting is extremely effective and simple to use!
3. SAVE your money
This tip is the most important of all. SAVE your money! Without this tip, the entire budgeting process is pointless. For budgeting, save your money first, then with the remaining balance (whatever percentage you have planned out) buy for your food, clothing or entertainment.
Steve Martin once said, “I love money. I love everything about it. I bought some pretty good stuff. Got me a $300 pair of socks. Got a fur sink. An electric dog polisher. A gasoline powered turtleneck sweater. And, of course, I bought some dumb stuff, too.” If we can resist buying those fur sinks, electric dog polishers and gasoline powered turtleneck sweaters and implement those three tips: Don’t fear looking at your bank account, use the three category budget system, and save your money, then we can further the process of becoming financially efficient step by step.