People tend to focus on their income and expenses when managing their personal finances.
They work hard to increase their income while maintaining expenses at an acceptable level. Different strategies are employed depending on the objectives they are trying to achieve with their personal finances.
In reality, personal finance is both personal and universal. While some strategies work for everyone, you still have to take your situation and personal requirements into account.
This applies to everything you do with your personal finance, including when cutting down expenses. To help you achieve the best results when reviewing your expenses, here are some secrets you need to know.
Be Ruthless
The first thing you need to do when you are in the process of cutting expenses is get in the right mind set.
You want to be ruthless about the expenses you need to cut. Sure, having both Amazon Prime Video and Netflix is necessary to watch different shows, but do you REALLY need to keep both? That’s the kind of ruthlessness you need.
Some conveniences are worth keeping. The Amazon Prime subscription mentioned earlier is a good example.
The extra discounts, free shipping, and other benefits you get from Amazon Prime are well worth the monthly fee you pay. Besides, you get Prime Video and other services for a fixed price.
Look at the Big Picture
Before making big financial decisions that add new items to your list of expenses, take a step back and consider a few things. Start by calculating whether the new expense is within your budget, especially if it is a regular or periodic one.
Spending more than 50% of your income on regular bills means you need to rethink your strategy and cut more expenses.
You also want to look at the market. When applying for a loan, for example, waiting for a couple of weeks for an announcement from the Fed could land you a lower interest.
These details matter. you can even turn to metrics like the Consumer Index from Cash Lady to learn more about how the market – and other people – are doing.
20% to Savings.
Another great strategy to employ is allocating 20% of your income for savings immediately after you receive it. This means you only have 80% of your income to work with, changing the entire dynamics of your personal finance.
Having only 80% of your income to work with gives you that extra motivation to really cut unnecessary expenses. You’ll start spending less money on Starbucks coffee every day. You will even think to limit your use of ride sharing services if you have to.
Keep track of the expenses you reduce on the go and budget accordingly for the following month. The more you implement this strategy, the more you can save in the long run.
At the same time, you are still saving 20% of your income every month. You can use this portion for investments, particularly for investing in opportunities that generate additional income or offer substantial capital gain over a longer period of time.
Do you have any more money saving strategies? Let us know.
