Handling finances in a responsible manner has been a major challenge for many. Countless studies explicitly show that for one to properly handle their finances, they must live on a budget. However, people manage their budgets differently, creating much deviation. Traditionally, people have been using a lax approach by frequently monitoring their account balance. However, with the current technology, new ways of budgeting for finances have been innovated. You can now use apps to monitor your daily spending and have greater control of how you are spending your money.
Budgeting is highly beneficial for those trying to save money as it enables you to know the amount your are spending, help you to identify unnecessary expenses, and also guide you in keeping track of all your transactions. There are also little ways that you can save money, for instance, many banks charge an ATM fee, but when banking online, checking account transfers are free of charge. While these small feeds seem insignificant, they add up and do make a difference, especially for college students trying to pay off student loans!
The budget jar method
From the many methods that you can use to handle your finances, the budget jar method’s effectiveness proves above average. This method entails the use of six jars, with each of them assigned to a specific purpose. For example, you can decide to assign one jar for rent, another one for entertainment, the third one for shopping, etc.
For those looking forward to a visual incentive, they need to understand that this method would be effective only with actual jars and actual cash. This philosophy is supported by several studies that show that people tend to spend less when they buy goods and services in cash. Consequently, this method is highly recommended to those looking to save money.
Naturally, tech companies have also made it possible to implement the idea of the budget jar method over onto your phone or tablet. There are many apps you can download which can easily be customized to allow you to “sort” your budget into categories. This alternative to the physical jars, can prove superior for some as it may be more convenient, especially when coupled with banking online!
Basic components of the budget jar method
Below are the six basic components of the jar method, with some suggestions for variations based on your specific needs and lifestyle.
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Basic Living Expenses
Given that expenses meant for your living needs takes the first priority, experts recommend allocating the first jar 55% of your total budget. Typically, this jar should cover expenses such as taxes, personal transportation, your rent, utilities, food, and taxes if you’re a freelancer. To simplify how this first jar is spent, you can further split it into various categories based on your primary needs. For example, you can opt to have a mini-jar for food, groceries, etc.
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Entertainment
Personal time for fun and entertainment should be prioritized as well. It’s important to reward yourself at the end of a day’s hard work! For this jar, Bright Side recommends using 10% of your budget to cover it. You should definitely cover expenses for going to a movie, purchasing a bottle of wine, tickets for going to watch a football match or grabbing a few cocktails with friends at the bar from this jar. For those living in the big cities, they are advised to keenly monitor this jar not to surpass the set percentage.
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Long Term Savings
During particularly rough patches, it’s often your savings that get you through. Also, having a separate kit from your budget to cater for savings could save you from emergencies requiring liquid cash. For this jar, the Bright Side recommends allocation of another 10% of your savings. This money should be restricted only to plans for your future. It would be a wise idea to invest this percentage to earn you interest and hence create passive income. You can opt for banking online in the best online high yield savings for good returns or invest in other interest generating projects. Take the money out of your checking account and pop it in your savings account already!
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Education
Bright Side recommends using yet another 10% of your budget to cater for educational fees and expenses such as books or other instructional materials. Due to the nature of this docket, your budget should basically be guided by your own needs and you should try to adjust it to fit your requirements. With the prospect of paying student loans hovering over your head, it’s important for students to set aside some savings for predictable college expenses and student loans.
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Private Reserves
This 10% of your money should go towards your personal purchases. This reserve would be of help whenever you need a lump sum for personal development programs such as yoga membership or a local club membership or a new pair of boots.
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Gifts
Okay, so you’ve already budgeted 95% of your finances. Consider using the remaining 5% from your checking account for a donation to a charity you hold dear, or towards a present for a friend who’s birthday is coming up.
Summary
Effective budgeting techniques are mostly defined by personal preference and liking. Therefore, it is highly recommendable to choose the method that you feel suits you and your needs best. Also, it is acceptable to simultaneously use different approaches or combine various budget methods if it works for you. Indeed, learning to budget could help you get a handle on your finances.
Sourced from: bustle
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