Essential Tips for Balancing Household Expenses and Routine Care
Most people who struggle financially believe their income to be the problem. In their minds, they’re just not making enough money. Then, a fortuitous event in the workplace occurs. They get a promotion or a sizable raise… and their problems remain unchanged.
How is this possible?
An average American spends roughly $1,100 per year on coffee. While reading this, you’re probably not even sure whether to be surprised. After all, chances are that, with few honorable exceptions, you never even asked this question.
This encapsulates the biggest problem with spending – that you are completely clueless about where your money goes. All that you notice is that you somehow always seem to be short on cash. So, here are some tips on balancing your household expenses and routine care and solving this problem once and for all.
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50-20-30 Rule
The first thing you want to consider is the simplistic 50-20-30 rule. Here, you set aside
- 50% of your budget for things you need
- 20% of your budget for your savings account
- 30% of your budget for your wants
The reason why this is so brilliant is that it makes it easier to prioritize. Naturally, the 50% for needs comes first. The bills and the mortgage have to be paid. So, when you’re facing a rough spot or find yourself in a bad position, you will have an easier time determining where to cut corners.
This is also a simple way to make evaluations of your budget. What you plan to allocate for bills or save and what you actually manage to do might not always be the same. Now, you have simple round percentages as a reference point. You take your income, turn on your calculator and multiply it by 0.5, 0.2, and 0.3. Did you manage to set aside this much for needs/savings/wants?
Now, a discrepancy happens month after month; chances are that you need to adjust the percentage to your current capabilities. Remember, 50-20-30 is not a hard-set rule; it’s just that the name is misleading, and the rate is arbitrary. It could just as well be a 60-10-30 or 30-30-40 rule.
It all comes down to your income and your expenses. If you have a customized shopping list for 2023, you might want to further edit your plans.
2. Write Down Everything
You should probably consider getting a budgeting app. The reason why this is so important is that it helps with the transparency around your spending. With an app
Still, many people are not happy with budgeting apps for many reasons. One of them is that they are not comfortable with the idea of giving a third-party app an insight into their finances. Some apps even require access to cards and accounts to make tracking more automatic.
While this concern is, for the most part, unfounded, we understand and acknowledge these fears. Fortunately, there are other approaches. You can always use tools like Excel and Sheets. You could even write it all down on a piece of paper. This way, you have the records, but you also have something to base your analysis on. By making a few simple comparisons, you’ll develop a much better understanding of your spending.
For the sake of this experiment, you should get one of Google Sheets budget templates and write down your rough estimates of how much money you’re spending on various expenses. Then, you should take another template, noting your actual monthly expenses. The difference will surprise you.
3. Gamify Your Savings
There are so many ways to gamify your savings. This can help you make a great emergency fund or savings fund or save up for a more expensive luxury that you want.
For instance, you can start with a 52-week saving challenge. With this plan, you add $1 to the money you set aside every week. For instance:
- Week 1: $1
- Week 2: $2
- Week 3: $3
- …
- Week 15: $15
- …
- Week 39: $39
- …
- Week 52: $52
While this may not sound as much, the truth is that this way, you can save as much as $1,378 by the end of the year. Most importantly, you don’t have to start at $1.
You also don’t have to increase by $1 or increase the cost at all. You could set aside $50 weekly and have $2,600 in your savings account/jar by the end of the year. Most importantly, you can do all this without putting too much strain on your budget.
4. Have an Emergency Fund
The most important thing to remember is that the biggest problem for your budget comes from unexpected expenses. By having an emergency fund, you would solve this problem in the simplest, most effective way.
It would help you avoid going to the pawnbroker, selling assets, or looking for payday loans (some of which have 300-500% APR).
Generally speaking, an emergency fund should have at least three months’ worth of income. So, if you make $2,000 monthly, your emergency fund should be at least $6,000 big. You can set aside money for this fund via one of the challenges we’ve described in the previous segment.
5. Too Much Austerity is a Bad Plan
Lastly, imposing too much austerity on your household is a bad thing. You only live once; living way below your standard out of fear is not a good idea. It will feel wrong and make it hard for you to stay motivated.
Unless you plan to save for something incredibly important (a house, a wedding, relocation, etc.), it won’t work. How can you explain to yourself that it makes sense to work 60 hours per week when you can’t feel the benefits?
Lastly, the simplest way to get disappointed is to set unrealistic expectations.
Wrap Up
In the end, there are just three things you need to do to balance out your expenses and improve your routine care. These are:
- Create a realistic plan
- Track and examine your expenses
- Show consistency in these efforts
While the plan is simple, it’s incredibly difficult to abide by. It requires habit-building and an incredible fortitude of character. Still, this is the only way to lead a healthier financial life.
