Bank finance articles and tips

One of the most important things you can do regarding your finances is learn how to budget your money properly. But this is often easier said than done. How do you know if you're spending too much or what you should cut back on? How do you stick to your budget once it's made?

The easiest way to determine if you're spending too much is to subtract your expenses from your take home pay for any given month. If you have little or nothing left over, chances are you are either spending too much or not making enough to fit your current lifestyle. Either way, you need to adjust your budget until you have a decent amount left over. Remember, you should be putting at least 5% of your income into an emergency savings account. If you break down your expenses but are not sure where you should cut back, consider this basic breakdown of expenses.

30% - Rent or Mortgage

10% - Utilities

15% - Food

15% - Transportation

10% - Debt

5% - Clothing

5% - Savings

5% - Investments

3% - Charity

2% - Miscellaneous

Some of us might look at the last few categories of the breakdown and push them off to the side but they are equally as important as the other categories if not more so because paying yourself first should always come as a priority if you ever want to get ahead of the game. Even putting away just 10% of your income towards your future can greatly add up over time. Another thing to seriously consider (if you have not done so already) is investing. Don't be afraid to spend a little bit of money on your education of investments since this knowledge can prove to be invaluable in the future.

Of course, this breakdown of expenses is just a rough guideline and you'll have to adjust your budget for your own personal situation. For example, if you are saving up for a down payment, you might want to put much more than 5% of your income and cut back on entertainment expenses instead. If you are severely in debt, you might have to put much more than 10% of your net pay into paying it down. The more you save on interest, the more you will have for other areas of your life.

Those individuals who are great with money tend to put a large portion of their income away to better secure their future in specific investments which they have researched thoroughly. Those who are bad with money tend to spend it as soon as they get it and therefore end up living pay check to pay check. If they do end up putting some money away in their savings, it's always gone as soon as a rough patch comes up, and if they do end up investing at all, they often do it without any research which results in them losing everything instead of profiting. This is why expanding your financial knowledge is so important, so make sure you leave some room in your personal budget to enhance your financial education.

The last thing you need to keep in mind when it comes to budgeting and saving is that it takes time. You have to keep putting in a consistent effort in order to see results in the long run. Don't get discouraged because it seems like it's "taking too long." Those who persevere will come out on top.



For more information, please see Budgeting and Saving

By Staz Johnson