A crucial part of wealth building, investing, and just managing your money wisely is figuring out how to balance your saving and your spending and then making sure you’re spending this money in the right places. Obviously, if you make $2,000 per month and spend every single cent of it on investments, you’ll have no savings, nothing to live on, and this isn’t going to be a sustainable way to manage your money.
With this in mind, today, we’re going to dive into what you need to know when it comes to managing, prioritizing, and allocating your income wisely and in the right places, allowing you to take complete control of your cash and build wealth in the most sustainable way possible.
Follow the 50/30/20 Rule
Perhaps the most common and easiest way to manage your money is using the 50/30/20 rule, which refers to the percentages in which you spend your money. 50% of your overall income can be used on the stuff you need to buy. This is bills, rent, and essentials you need to live on, and will get you through day to day.
The 30% is then used for extras in your life or anything above essentials. This includes Netflix subscriptions, entertainment, going out, going to the gym, and things like this. Finally, the 20% of your income is then used for savings, planning towards your future, and paying off your debts.
If you’re able to follow these rules strictly, you’ll have a great way to live. Of course, if you work hard and adjust your spending, perhaps one month you’re only spending 40% on bills and 25% on living and can save an extra 15%, this is going to make a huge difference for you in the long-term.
Pay Debts Off First
Debts are more draining than you may first think, especially when they come with ridiculously high-interest rates that keep you in debt for many years without even realizing it. Always prioritize paying your debts off, even more so than saving. The quicker you can get out of debt, the less you’ll be paying in fees in the long term.
The financial industry twists and turns all the time, and while saving your money in a certain savings account or investment fund may be the best method to save right now, it may not be the best tomorrow, and you’re not going to know about these changes unless you proactively stay up to date with what’s going on.
If you’re serious about your finances, this means you’re going to need to take time researching the best publications and staying up to date with the latest trends. Websites like Forbes, Lifehacker, MyWealthandInvestment, and more, are all ideal for this, but you’ll need to decide which website suits your style of learning and living.
Prioritizing your income can be hard work and a little bit overwhelming if it’s something you’re used too, but with a little hard work and by paying attention to what you’re doing, you’ll soon find yourself setting a proactive routine where you can look after your finances and set yourself up for security in the long term. This means a happy life ahead where money isn’t an issue!