There comes a point in one’s life – usually shortly after landing that first job – when one has to stop ‘winging’ it, buckle down and take stock of personal expenses. Obtaining money is the first step, and then you have to know how to track it. With the right fundamentals and basics in place, half the battle is won.
Record every expense
One popular method of expense management is to record everything one spends on a monthly basis. This includes things as menial as a cup of coffee to as large as a new stereo for the car. After this period, one will be able to review one’s expenses and eliminate unnecessary areas that one was not aware of before.
The Pay Yourself First Rule
A basic key to personal expense management is the pay yourself first rule, made famous by Robert Kiyosaki in his book, “Rich Dad Poor Dad”. This simply denotes setting aside a portion of one’s salary every month as soon as one receives it. This creates a methodology for forced savings, with a portion of one’s money always banked separately. This method is purported to work better than to implement savings at the end of the month, after all other expenses are paid.
The 50-30-20 Rule
This highly popular budgeting system basically allots expenses into three clean categories:
• Fixed Expenses
Anything that covers necessities such as shelter, food, rent, transport, repayments – basically one’s day-to-day expenses. This section should not exceed more than 50% of total net income.
• Lifestyle and Recreation
This is basically the wants category that includes all choices one makes in lifestyle expenditure. This could be anything from tickets to the movies to holidays and spa treatments. This section should not exceed more than 30% of total net income.
• Financial Decisions
The last category will include a sum set aside for emergencies or later in life (retirement). This will also include repayment of debts or basically any financial decisions made for investment purposes. This will be made up of 20% of net income.
The key factor when applying this system to one’s lives is to be disciplined about it. The allotments should be adhered to strictly, without much exception.
When it comes to expense applications (apps) via either the Apple or Android store, members of the public are spoilt for choice.
You Need a Budget (YNAB)
Apart from its basic budgeting function, this app has garnered substantial acclaim through its several add-ons: access to financial literacy classes, tutorials, a community of users, budgeting tools and tricks, and more. Apart from teaching people to save money and stop living paycheck to paycheck, YNAB also assists one to set financial goals and stick to them.
As its name would suggest, this app allows one to have an overview and to track expenses while syncing information stored across multiple operating systems. Users can enter their monthly income as well as create budgets in different categories that include the paying down of debts.
This app is particularly useful for those who travel for business, allowing users to generate expense reports seamlessly after adding in information. Another key feature that the app offers is Smartscan – where users are able to take a picture of a receipt and automatically record it as an expense (tomsguide.com).
The list goes on, one only has to type the words expense or budget in the search fields of the respective app stores and a plethora of resources will become available.
When it comes to managing expenses in the world we live in today, it is evident that resources are aplenty, one only has to search for them and employ systematic budgeting rules to obtain the goals one wants. A bit of hard work getting used to a new system goes a long way in terms of money management.