We’ve all met people who consistently discuss their plans for early retirement, large savings accounts or alternative sources of income.
Whenever we hear about other peoples’ successes, we often experience competitive urges that lead us to question our own achievements and ourselves.
Oftentimes, we rush home and immediately try to set plans to reach those lofty goals, but we end up giving up or making excuses because the goals seem too difficult to surpass.
There is no perfect or easy way to draft a budget and stick to it for more than a few months. Hopefully, the following six keys to budgeting will show you how to budget your income and see amazing results without feeling overwhelmed.
1. Set aside the amount needed to pay the monthly bills.
Budget out the amount you will need to pay the bills for any given month, including groceries and toiletries. Your bills should not be higher than your income, or really, over 50 percent of your total monthly income.
If it is, you should rethink your wants versus your needs and cut down on indulgences. Since most of us are paid bi-weekly, separate your bills accordingly. If you budget this ahead of time during the month, it will be easier for you to track your spending and save more.
2. Consider RRSP/investments.
We’ve entered into a new age in which many people are beginning to recognize the importance of investments and creating an opportunity for a second income.
To truly see your finances grow, you must invest to ensure continuous monetary flow and learn to make better financial decisions. Your investments could be in the form of stocks, bonds, mutual funds or real estate.
Research what is best for you. An RRSP is not an investment, but rather, a trust that offers tax benefits for retirement savings that is offered in Canada.
This is an important option for saving for your retirement and securing your future. You can decide what amount is best suited to use for your RRSP or investments, depending on what you earn.
It would also be best to have this amount withdrawn from your bank account on a set day monthly to avoid the temptation of spending it on something else. As your investments begin to grow, you will see the benefit and appreciate all the effort you put into it.
3. Maintain savings.
Yes, though we’ve discussed these alternate methods of savings, you should still have a personal savings account. Your savings can be separated into three different types of saving accounts, or just one, depending on how anal you are about these things.
The different savings would be for your regular personal savings, emergency fund and for specific needs and wants (like a trip to Bali, new home, car, etc.).
I realize this seems a bit complicated, but the reason it is so important to separate the different savings is to ensure you do not use what you do not need to use.
Again, since everyone has a different monthly income, the amount of money dedicated to this purpose is different for each person. If you have a set timeline for a plan, it may push you to save a particular amounts every month.
4. Give back to charity.
This engages in Deepak Chopra’s two principles of karma and giving. The law of karma states that every action generates a force of energy that returns and the law of giving states that you continue the circulation of wealth by giving and receiving gratefully.
Basically, when you give consistently, you will receive it back consistently, which will open doors for you to gain in areas of your life that are lacking.
It is also necessary to give more in use value than cash value (as in, the most powerful forms of giving are non-material), so don’t focus on just giving money; give your time and effort, as well.
Help that older lady next door who has not been able to cut her grass. Whatever you choose to do, just remember to do it with a grateful heart so it will return to you and your offspring in many different ways.
5. Make a monthly commitment to a religious belief or institution.
This may not be for everyone, but many religions follow it. The main idea is to give back to God what has been given to you. This can be connected to charity, but is still a separate entity. Consider showing your sense of faith — whatever that means for you — when you have future troubles.
6. Start a personal monthly account/checking account.
Your checking account will possess an amount that will give you the extra cash you may need that you will be able to use without going into your savings.
This personal amount is set apart for your wants, like a new pair of shoes, a new bag or to color your hair. It’s for anything that focuses on your wants.
There are a few different options: You could keep most of your liquid cash in a checking account so you always have access to it, or you could keep the money you’ll spend for a month in a checking account plus several hundred dollars, or you could keep as little money as possible in checking and put the rest into the savings to earn some kind of return on your dough.
Now, take a breath. Try this for 100 days and see the results for yourself. You won’t have a million dollars stacked up, but you will feel amazing and in control of your financial future. That’s something — and it’s a whole lot better than nothing.