As many of us have to jiggle our finances and make detailed plans to get by during these difficult times, we decided to take another semi-regular look at some useful budgeting tips. These are general things to consider in your house and with your finances that may not be obvious at first glance.
With one caveat. Assuming on your old wage you had enough money to get by and live a comfortable life. Well, in that situation, should you receive a pay rise, try and put it to good use. We all like and need a treat now and then, but generally you should use the excess funds to save, and invest. Make the money work, or use it as back up should you need it in the future. Life will be a lot less stressful as a result.
We here at Moolr think this is a good general rule to abide by. If an appliance breaks, consider its age when deciding what to do. And the decision is whether to replace or pay for a repair, The risk is it may break again any time. so our general rule is if the appliance is seven years old or more, then replace it, as it is too old to be worth repairing.
This is the big dilemma for any of us with debt. If you have no debt it is easier, as any income is yours to do as you please after the bills are paid. The key is getting a ratio on what you do with your money. The general agreed ratio is 50% goes towards life’s essentials, 20% to debt, and 30% for other stuff such as lifestyle. So eating out, holidays etc. However, if you feel your debt is tough to manage or out of control, you may want to alter those last two ratios. Debt reduction should take priority, and by setting goals is easier to achieve and endure.
If you do have debt, make dealing with it your priority. Many of us have manageable debt, a mortgage being a prime example. But if you are just paying off interest on credit cards, then act on changing that. Make sacrifices, and aim to cut out your biggest interest debt first. Then move onto smaller problems. Write down all transactions, plan, trim and make sacrifices if necessary.
Even if you have debt to pay off, you should not sacrifice everything. You should look to spend between 10-15% of your income on food, and it is perfectly acceptable to spend at least 5% on you. and by that i mean clothes, treats, and more. We cannot all live like monks. But if you can make some short-term sacrifices, then you free more money down the line.
Then try and double your portfolio each decade. Also, divide 72 by the expected growth rate of your investments, expressed as in percentage terms (%). Should you expect to bring in 10% per year, for example, it will take you approximately 7.2 years to double your money. It’s a good rule of thumb to go by.