Nobody teaches you at school how to look after your money once you get into the real world of earning a salary, paying bills and trying to save. For this reason many people end up borrowing beyond their means and can often find themselves buried in a sea of debt.
If you are looking to avoid this fate then you should pay close attention to what you are doing each month with you money and try to create a routine which will put you in a strong financial position. When it comes to dividing up your monthly salary, here are some tips on getting it just right.
Bills, Bills, Bills
The bills are the single most important part of your monthly spends and you should know exactly how much you are paying each month, and who to. If possible, aim to have every single bill coming out on the same date, or within a few days of each other, this will make organizing your bills far easier. If this is not possible then create a separate bank account solely for bills, pay in how much you need when you receive your salary and then don’t even look at the account, just let the bills come out.
From the money which you have left once you have paid off your bills, you should be looking to save at least 30% of it. There is a great temptation not to save and to simply spend your money as you see fit, this may work in the short term but it will cause problems in the long term. In order to avoid debt, you should be prepared at all times for any emergencies or big purchases and the only way to do that is through a careful and consistent savings plan.
With the 70% that you have left after bills and savings, you should look to the month ahead before deciding on how much you are going to spend. The reason for this is so that you can be prepared for something which you need to pay in the future such as car insurance, gym memberships or any other annual payments. Equally, if there is an event or a party which you are going to then you can be far more prepared for this if you use some money from 2 months salary rather than just one.
Once you have paid your bills and your savings and planned for the coming month, you can start dividing up the remainder of your cash into weekly spends. Make a list of what things you must spend money on such as food and then take four envelopes and place the remaining money into each one. Try your very bets not to open one of the envelopes until the week that it is for, and aim if possible to have money left at the end of the week.
Follow this recipe with your monthly income and you can avoid debt and have more cash on the hip when the time comes.