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Just a few months ago a friend came to visit me. While we were talking about money, I realized that at 32 years old she had put only two or three thousand dollars aside. She earned a good living, had some good partying, but has not traveled much and above all has saved almost nothing. As for me, in my 29 years I have a lot more money aside. Since I started working, I visit at least one foreign country a year, and I believe I also have fun.
Following my recent interest for news sites dealing with personal finances on the net, I realized that everyone does not manage money effectively, and I think the main cause is the lack of information.
My friend concluded the discussion by saying “you are good at making money”. I’m going to share the method I use to manage my money. It’s not rocket science you’ll see. It’s mostly a matter of common sense and let me tell you straight out, I use discount codes when shopping. That helps me save a ton of money.
To manage personal finances, there are three mechanisms to implement:
- Make a Budget
When I started working after my studies, I had the chance [I worked a lot of extra hours] to quickly earn a good salary and spend the first month testing my new purchasing power in unnecessary and expensive gifts. I told myself that I needed to start planning my expenses in order to save money or travel, so I made a budget. This is how I did it:
Take your net monthly income; make an inventory of all your fixed expenses (rents, credit card charges, debts, insurance, income tax). Sum up that amount and deduct it from your monthly net income.
The sum that is leftover is the amount of monthly cash you can spend on your variable expenses. This includes food, transport (fuel or ticket), clothing and finally leisure (outings, shopping…).
I advise you very strongly to take part of this sum and save it. Your saving capacity is strongly dependent on your income. I find it wise for a young person, early on in their career, to save 10% of their net income before tax.
This will allow over time to build up a small capital to invest or buy an apartment. For my part, in addition to this amount dedicated to savings, each month I saved a little money to pay for a nice trip every year, of course it all depends on your taste and your priorities.
The idea is ultimately to ensure that all expenditure should be provided (fixed costs, savings), and then a little money left over to have fun.
After removing my fixed expenses and the money saved from my net income, I divide the amount by 4.2 to know how much money is available to me every week.
I thought it was more convenient to manage my money per week because if I spent a little too much, it was enough for me to pay attention for a few days until the following week (weekends are shorter than the ends of months).
Making a budget is good but the most important thing is sticking to it. This requires careful monitoring of your spending.
