Income and expenses (and money) management, in general, can be a tricky subject for many. Perhaps you’re worried about saving for retirement or anxious about not having money for the rainy days. The good thing is there’s no shortage of ways you can simplify your income and expenses and manage your money better.
For many, using a budget tracker template is one of the best ways to accurately track their income and expenses and supervise their money accordingly. And that’s just for starters. Below are five of the most effective tips ways you can simplify your expenses and income (and your finances) in general:
1. Determine your net income
If you don’t know how much money you will have after taxes monthly, it would be difficult for you to manage your money accordingly. As the saying goes, “what gets measured, gets managed.” Figuring out your net income is more effortless if you are a salaried employee with a fixed income.
However, it can be a bit challenging if you are a freelancer. Once you determine your number, add in any side gig income. Perhaps you teach a weekly yoga class, or you have a blog that earns ad revenue. Whatever extra income you will earn, make sure you add it to your net income for the month.
2. Track your spending
Time to play detective! To get a complete picture of where your money is going and how you are spending it, you will need to do some financial investigation. If you find the task overwhelming, limit yourself to your income and expenses for a month.
Get all your statements in one place, including all your utility bills. As mentioned earlier, a budget tracker template can come in handy. Using your budget tracker template, you can also label your purchases accordingly (i.e., wants, needs, bills, etc.).
Once you have all the expenses in one place, add them all up to see where the bulk of your income goes. Finding out how much you are spending and where your money goes might surprise you.
3. Create a plan
Now that you know how much you are earning and how much you are spending, it’s time to create a plan. In essence, the best strategy should align your priorities with your spending habits.
For instance, if you are a fitness buff and you found out that you spend a lot of money on athletic gear, gym memberships, and yoga class cards, you won’t have to cut out anything fitness-related since it is essential to you.
However, to meet any priorities you have set (for instance, saving for retirement), you need to cut expenses elsewhere. This can mean brown-bagging your lunch rather than eating out or shopping at discount stores and not at luxury boutiques.
4. Stick to your plan
Once you have created a plan, give it a try for a month. Anything less than a month, and you won’t be able to see the full benefit of keeping an eye on your income and expenses (and your finances as a whole).
5. Determine what works and keep doing it
One fundamental principle that applies to money management is this: “if it’s not broken, don’t fix it.” Once you find techniques that work, don’t get distracted by conflicting financial advice or new applications.
While it would be tempting to try new things, especially if it promises to be simpler, faster, and easier, doing what’s already working is considered ideal. If you are meeting financial goals, managing your finances accordingly, and building security, keep at it. Your focus and consistency will eventually pay off.
One of the best ways to build financial security is to grasp how and where you are spending your money, creating a plan, and sticking to it. While it is possible to get thrown off track at times, as long as you get back to your plan right away, you still have a massive chance of reaching your financial goals.