Personal finance, is actually personal!
Some personality types love creating a line-item, detailed budget within a spreadsheet, in software or through old-fashioned paper-and-pencil.
Other people, however, tend to be “big-picture” thinkers, and the notion of a detailed budget turns them off.
If you’re one of those personality types that prefers to take a big-picture look at budgeting, rather than drawing out a line-item agenda, what can you do to make sure you stay on top of your money?
Here are tips:
Always Look for Deals
If you approach every expense with a money-saving, money-conscious mentality, you’ll be able to pare down your expenses without necessarily needing a line-item budget.
There are tons of great deals out there if you just look for them. Compare prices online. Create do-it-yourself projects. Cook meals from scratch. Switch to LED lights, which will save your electricity costs.
Bottom line: Even if you’re not going to create a paper-and-pencil budget, you DO need to pay attention to the details of your daily habits.
Open Sub-Savings Accounts
Saving money for the long-run should be as important as managing money in the short-term. What does that mean? Essentially, it means that you shouldn’t get so overly caught up in the minutia of day-to-day penny-pinching that you ignore your long-term goals, such as emergency funds, retirement, and home and car maintenance.
Decide how much money, per paycheck or per month, you want to devote to each of your long-term goals. Then automatically withdraw that money every two weeks or every month into a savings account earmarked for that specific goal.
For example, you might want to use online saving platforms like , that allows you to create little sub-savings goals, such as “Buying a New Car” or “Paying for Rent.” You can make an automatic withdrawal from your checking account into each of these sub-savings accounts every two weeks or every month.
Analyze Where You Spend Your Money
Okay, so you’re not making a line-item budget. But you can still be conscious about where your money is flowing. If you find yourself ordering beauty products on Jumia weekly, or if you notice that you’re going out to dinner with your friends twice a week, you’ve identified a large drain on your wallet.
You don’t necessarily need a spreadsheet to tell you that you’re spending a lot in this arena – you just need to become more conscious of it.
Set Specific Financial Goals
Figure out how much you want in retirement by a certain age and how much you want to save for your child’s education.
Get organized by setting specific goals with deadlines. Then work backward to figure out how much you’ll need to save each month to achieve that goal.
Follow the 80/20 Rule
At a minimum, you should save 20 percent of your take-home pay. If you don’t want to line-item every detail in your budget, then at the very least, automatically set aside 20 percent of your take-home income, and spend the rest. I refer to this as the 80/20 budget.
The 20 percent income that you’re saving should be earmarked towards long-term expenses, such as retirement, making a down payment on a house or creating an emergency fund. It should NOT be used for short-term savings goals like buying a new dishwasher, which is a discretionary purchase.
Invest Your Income
There’s a limit to how much you can earn and save. But when you put compounding interest to work on your behalf, your money begins to grow at an astounding rate.
So start investing early in life and enjoy the process of watching your money double or triple!
Share your thoughts!