Being financially under organised can have massive implications on your quality of life. You may be spending extra money that doesn’t need to be spent, and be unable to budget for emergency situations.
The bottom line is that no-one needs added stress about financial matters. That’s why ensuring that you take care of your finances properly is so important.
While being on top of your finances sounds great in theory, there is a lot of conflicting information about how to do it.
Here, we’ve compiled five tips to help you stay financially organised – and help you tackle overwhelming financial issues.
Figure out a budget that works for you
When assessing your money, and figuring out how much you have to use towards specific things, it’s important to work out a budget. A budget should include your required costs (like rent and utilities bills) and then a section for optional spending – like holidays, or entertainment.
A good rule of thumb is to break your budget into three parts – necessities, entertainment and savings. This is commonly known as the 50-30-20 budget. The digits stand for the percentage of your income that can be allocated towards different things. 50% of your income should go towards necessities, 30% towards entertainment or “splurge” purchases and 20% towards savings – or other responsible financial means, like retirement.
Breaking your budget into these three categories means that you’ll cover all your necessary costs – and be able to enjoy your life too.
Introduce a waiting period for large purchases
To ensure that you don’t purchase large ticket items on a whim, it’s a good idea to introduce a waiting period before parting with your hard earned cash. For example, if you decide you’d like to buy a new laptop, you should wait until your designated waiting period is over, and if you are still thinking about the item then you probably really want it and will use it a lot.
You can set different waiting periods depending on the item. If it’s a $100 item, you might have a 24 hour waiting period, whereas if it’s a $1000+ item, you might designate a 72 hour waiting period.
Always have an emergency fund
Life happens, and unexpected costs are almost guaranteed to pop up at one time or another. Sometimes these costs are unavoidable and impossible to delay – like an urgent medical cost as a result of an accident or a car break down.
If these emergency costs arise, and you don’t have the funds to cover them, you may need to put the amount on a credit card or take out a payday loan. Both of these solutions require extra costs – whether it’s in the form of interest or other fees and charges.
Of course, emergency costs are unexpected, so it’s pretty much impossible to know exactly how much you need in a rainy day fund. However, we’d recommend having an emergency fund of at least $2,000, as this amount should cover most financial emergencies, without having to borrow money.
Aim to save a percentage of your income by age milestones
As most people get older, they have more liquid income that can be used towards savings. Plus, for many, the older they get, the more importance they place on savings.
You can capitalise on this by setting yourself goals to save a certain percentage of your income by certain age milestones.
For example, at age 20, you may want to save 10% of your salary, and aim to save 15% by the time you’re 25. Set yourself a plan where your saving percentage is gradually increased, and this will help significantly when you start to think about retirement, and how you’ll be able to afford it.
Apply the 20% deposit rule
If you’re in the market to buy a very expensive item, like a new car or home, you should apply the 20% deposit rule. Before making these large purchases, you should have enough savings (or income) to be able to pay a 20% deposit.
This rule shows that you have the restraint to save your money responsibly, and will be able to do so for future payments. Plus, it demonstrates that you make enough money to afford to take on a large loan.
By applying the 20% rule, it will ensure that you don’t spend too much money on an item that’s not realistic for your current budget.