envelope budgeting Archives

How To Avoid Spending All Your Paycheck Right Away

When you are working around the clock, the end of June signifies one important thing. And that is? Payday is fast approaching! You can either stretch every cent you receive or waste it all in one day. The choice is yours.

A particular story comes into my mind when I dwell upon this topic. You see, I decided to reward myself after receiving my paycheck for the month of May. Do not worry about finances just yet! I allocated 10-15% of my salary for leisure and relaxation purposes.

I waited until the next day to stroll in the nearby shopping centre to avoid the massive crowd. I chanced upon a relatively vacant fitting room with merely 5 people (including the staff). With no intention of eavesdropping, I listened to the playful exchange between the two saleswomen. I was trying several looks on and it took me a while to change into them. To my surprise, the playful exchange got really deep! One lady elaborated how she blew her salary right away. She loaned the money to her family member. Not to mention, she partied the other night with some friends. She was upset to be trapped in a financial dilemma. Who wouldn’t be?

Image Credits: pixabay.com

Yes! It is not nice to eavesdrop on someone even by accident (sorry about that), but her situation can enlighten you. It made me realize that some people are struggling to control their money after receiving it. If you are caught in this situation, here are some things that you can do to turn things around.

TRY STICKING TO A BUDGET

This may sound utterly obvious and totally uncool, but you need to craft a realistic budget and stick to it. Planning how you will spend your paycheck allows you to prioritize your bills and schedule other expenses. It lets you account for your hard-earned money. If you cannot establish a budget with a paper, you can always use a free budgeting app.

Weigh between your needs and wants. While it is cool to have the latest gadget in the market, it may not be necessary. Stick to your budget! Remember that it is better to own items than to owe them.

GET YOUR PRIORITIES STRAIGHT

How many times have you heard the advice to “keep your priorities in place”? Do you follow it yourself? Keeping your priorities intact allows you to secure your financial future. One of my top priorities is growing my savings. I am gradually fulfilling this by accounting for every dollar I make.

Accounting for every dollar you earn takes budgeting to the next level! It assigns a label for every chunk you make. I found that “Envelope Budgeting” was helpful for this task. With envelope budgeting, I can easily allocate a specific percentage for my expense categories. It is alright to place a responsible amount for splurging. You deserve it!

AUTOMATE YOUR SAVINGS

Did you know that it is possible to sock away your income as soon as you get it? You can achieve this by automatically depositing your salary into your savings account. Award-winning finance journalist Jean Chatzky is an advocate of this. “Automating savings is the first thing everyone should do with their paychecks,” she said. She went on by saying that you cannot spend the money you do not see. I certainly agree! It is easier to save money without the tangible temptations.

In Singapore, there are institutions which allow you to automate your money such as the POSB eMySavings Account. This automatic monthly savings account allows you to keep S$50 to S$3,000 during each “savings date”. You are free to choose a schedule that works best for you.

Image Credits: pixabay.com

From building an emergency fund to gaining self-control, there are other ways to avoid spending all your paycheck immediately. You just have to be creative!

Sources: 1 & 2

7-Day Spending Cleanse Ideas You Must Try

It is amazing to start the Lunar New Year with a clean financial slate and increased savings. So, begin the year with a 2015 spending cleanse: short yet impactful exercise to help you clear your mind, focus on your goals, and improve your buying habits. There are no excuses because a short-term intervention (7 days) is a good place to start.

In just a week, your financial awareness can help you stop spending on unnecessary items and eventually help you break the bad habits. Try these 3 Spending Cleanse Ideas and come out more motivated, focused, and richer.

You must first figure out a budget plan that helps reach your financial goals before starting the cleanse. Seek guidance from family, friends, or YouNeedABudget.com.

1. ELIMINATE THE UNNECESSARY

Plan: Identify a category where you are overspending then, slash that problem area.

Purpose: To allocate more money for shopping, emergency fund, and savings.

If you a person who does not pack for lunch and only go for local restaurants, gourmet counters, and coffee shops everyday then your expenses can take about S$450 of your income. With this cleanse, you will have to go on cold turkey and avoid buying for outside food for 7 days. You will find yourself save more afterwards.

Just by reducing expenses in one category such as switching back to basic cell phone plan; you can save up for your dreams in just a few years. It is so simple! There is no sense if you go back to your unpleasant ways.

2. HAVE AN “AUTO-SAVE” SYSTEM

Plan: Program regular account transfers to help you reach your goals while having a busy schedule.

Purpose: To save money for retirement, emergency fund, and vacations before you spend it all.

Contemplate upon your budget and begin writing a list of the things you want to save for from your needs (e.g., emergency fund) to your wants (e.g., Christmas vacation in Paris). Divide your income to the needs first then, divide what is left to your wants. You need at least two bank accounts: one for your needs and one for your wants. The next step is to set up automatic transfers or direct deposits that will move your money into each account on payday.

3. NO MORE PLASTIC CARDS

Plan: Withdraw the week’s spending from the bank in cash. When it is gone…it is gone.

Purpose: Saying no to credit cards will cut down the impulse purchases.

Most people talk about how important their long-term financial goals are but their regular buying decisions do not support their goals. This cleanse will have you keep your credit and debit cards at home so you can easily notice when you are losing money for every purchase. Before the week begins you must spare 25% of your income and divide it to your spending categories and put all in different envelopes.

Image Credits: wikihow.com/Do-Envelope-Budgeting

This will be your only allowance for the whole 7 days and all for purchases shall only come from it. Research showed that the act of relying to cash for spending makes you savor the paying process, think more, and spend less. Trust me, it works.

3 Simple Tips To Stop Living From Paycheck to Paycheck

Living barely within your income is not a laughing matter. When you are living paycheck to paycheck, you live a life of constant stress, worry, and dread that you might be stuck in an unfortunate debt. It is a struggle to gain control of your money and your commitments. So, here are 3 Simple Tips To Stop Living From Paycheck to Paycheck…

1. CREATE A SYSTEMATIC FINANCIAL OPERATING SYSTEM

In order to cease your worries, a huge turnover can be money flow management. You must give conscious effort to know about where your money flows in and out. Once you have control over your money flow. Then, you will be able to create a systematic financial operating system that consists of: money flow management and budgeting.

Money flow management is accomplished by using a ledger or an app. There are a couple of efficient yet free apps that can help such as: EXPENSIFY, EXPENSE MANAGER, MONEYWISE, POCKET EXPENSE PERSONAL FINANCE, and MINT.

Image Credits: wikihow.com/Do-Envelope-Budgeting

Likewise there are a couple of budgeting such as STATIC or FLEXIBLE budgeting. For personal finances, I highly recommend a simple technique called ENVELOPE budgeting. It starts by storing the cash into separate categories of household expenses that are allocated in separate envelopes.

Budgeting will surely help you gain clarity and control. Start by writing down your monthly income, followed by your monthly expenses, and then subtract the two. Plan and search for a suited technique.

2. PREPARE MONEY FOR YOUR BILLS ACCORDINGLY

Some bills are due frequently while some are semi-annually. Prepare money for your bills accordingly by noting them down. If you have a monthly bill, you may try a trick called half payments. For half payments, you prepare the payment for the bill by subtracting half of the bill’s amount to your bank account per two weeks (bi-weekly).

3. BOOST YOUR EMERGENCY FUND

Prepare for the unforeseen events and financial failures by saving at least 8% of your income per month. You shall call this category your “emergency fund”. It is better to save a certain amount of money than to have nothing save at all.

Use Envelope Budgeting To Manage Your Money In Just 3 Simple Steps

According to DEBTSteps.com, envelope budgeting or envelope system is a popular way of maintaining a budget. It starts by storing the cash into separate categories of household expenses that are allocated in separate envelopes.

1. TRACK YOUR LAST MONTH’S SPENDING PATTERNS

One of the first steps that you have to take is to analyze your spending patterns, variable expenses and fixed expenses (i.e., monthly electric bills).

Fixed expenses remain the same every month (e.g. Hand Phone Plan, or HDB Rent). Variable expenses include food, entertainment, clothing, and other expenses that may change every month or year. The challenge now is for you to choose on which expenses you can reduce.

2. DEVISE A BUDGET PLAN

Recording all your expenses, no matter how big or small they may be, can help you plan your budget wisely. Categorize your expenses 7 or more sections such as Rent, Utilities, Electricity, Groceries, Gas, Entertainment, Savings, Loan, Childcare, Tax, Travel, etc.

For example if you are Fresh graduate living in your parents’ house and you earn S$1600 a month. Allocate your money with the fixed expenses first.
Rent- S$700

Utilities- S$150

Electricity- S$80

Student loan- S$100

Fixed Expenses Total: S$ 1,080

Then your variable expenses…

Savings- S$170 (transfer it to your bank account)

Groceries- S$100

Travel- S$100

Entertainment-S$100

Emergency- S$50

Variable Expenses Total: S$520

3. PUT YOUR INCOME IN SEPARATE ENVELOPES

Image Credits: wikihow.com/Do-Envelope-Budgeting

Use your marker to assign each category to each envelope. Use whatever size is best for you. It shall be able to fit easily in your purse or wallet. Follow the budget plan and allocate your money accurately. Spend only from the designated envelope and stop spending once you’ve emptied it. This practice of discipline will help you save a great deal of money.

Watch this simple video tutorial of the envelope budgeting or envelope system by NCNBlog:

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