When getting wages, it is not uncommon for us to feel that we have the power and freedom to use these funds. This sometimes makes it easy for us to fall into bad shopping habits and take no responsibility or waste.
Launch SCMP, even though it is important to keep expenses if we want to have enough funds in old age. Many millionaires say the secret to building wealth is by suppressing living expenses.
Although, it is not always easy if we have below average income and have to bear debt and other financial burdens. The amount of income that must be spent, saved, invested also depends on the lifestyle we want to live now and in the future. As well as personal financial goals that we want to achieve.
Here are 7 indications that you have spent more money than you should as well as tips in order to reduce expenses:
1. The budget is based on salary
Expenses that we budget should not be based on the total salary earned, but after the salary is tax deducted.
If we budget money based on the amount before tax, chances are we are exaggerating the amount of money that can be spent.
Use a simple financial calculator to calculate monthly salary figures on take home pay and how much we spend each month.
2. Expenses exceeding income
The key to achieving financial stability is having more income than spending.
When we include all fixed expenses, ranging from rental housing, food to gym membership, the amount must not exceed monthly income.
If the amount exceeds income, then there are expenditure items that must be reduced so as not to have to owe.
For most people, especially with non-permanent income, managing financial inflows and outlines can be difficult.
However, this can be overcome by calculating the average income for the last 12 months.
If you want to be safer, use the lowest income for one year to become a benchmark of income. It is used to determine our spending limits.
3. Negative net worth
When our expenses exceed income, it may end up with a negative net worth in which we have more debt than the amount of income.
Many people experience it like in the United States.
For example, the Federal Reserve Bank of New York reported, in 2016 that around 15 percent of households in the United States had a net worth of zero or less.
For some people, filing for bankruptcy can overcome debt payments, but not all types of debt are written off in bankruptcy.
What's more, it can affect our ability to borrow money in the future. Devising a debt repayment plan might be a better choice.
4. Consistently owe with a credit card
The use of credit cards for all or most of our needs may indeed look fine, as long as we can pay off the balance in full every month.
If not, or we only make minimum payments, the remaining balance will continue to flower and grow exponentially.
Credit card debt does not mean bad, but it is a sure sign that we are actually spending money that we don't really have.
Consider consolidating our debt with a personal loan or a 0 percent balance transfer card.
5. Rents for residences exceed 30 percent of income after tax
A rough guide to housing rental budgets is 30 percent of income after tax.
For example, a person with a monthly salary of Rp. 7 million after tax deduction, ideally spent less than Rp. 2.1 million per month on living expenses.
This can be difficult to implement if we live in cities with high living costs, but this is a good benchmark for achieving financial independence.
6. Buy items to impress friends
If we buy tickets to each festival and participate in activities that spend money only because of friends, then it can make expenses swell.
Moreover, social media worsens spending because of uploads that show the high lifestyle of a person.
Even though we don't necessarily know the financial condition of each of our friends on social media. It could be worse, but they try to impress their followers on social media with uploads about "wow" lifestyles.
7. Not saving at all
Saving for retirement must always be part of our budget, even since we first worked.
Maybe we have convinced ourselves that we can't save because we don't make enough money or the cost of living is too high, but we may just spend too much money.
There are many useful applications that we can use to look carefully at expenses per month. So that it can help us choose one or more expenses to reduce or eliminate them altogether.
Launch SCMP, even though it is important to keep expenses if we want to have enough funds in old age. Many millionaires say the secret to building wealth is by suppressing living expenses.
Although, it is not always easy if we have below average income and have to bear debt and other financial burdens. The amount of income that must be spent, saved, invested also depends on the lifestyle we want to live now and in the future. As well as personal financial goals that we want to achieve.
Here are 7 indications that you have spent more money than you should as well as tips in order to reduce expenses:
1. The budget is based on salary
Expenses that we budget should not be based on the total salary earned, but after the salary is tax deducted.
If we budget money based on the amount before tax, chances are we are exaggerating the amount of money that can be spent.
Use a simple financial calculator to calculate monthly salary figures on take home pay and how much we spend each month.
2. Expenses exceeding income
The key to achieving financial stability is having more income than spending.
When we include all fixed expenses, ranging from rental housing, food to gym membership, the amount must not exceed monthly income.
If the amount exceeds income, then there are expenditure items that must be reduced so as not to have to owe.
For most people, especially with non-permanent income, managing financial inflows and outlines can be difficult.
However, this can be overcome by calculating the average income for the last 12 months.
If you want to be safer, use the lowest income for one year to become a benchmark of income. It is used to determine our spending limits.
3. Negative net worth
When our expenses exceed income, it may end up with a negative net worth in which we have more debt than the amount of income.
Many people experience it like in the United States.
For example, the Federal Reserve Bank of New York reported, in 2016 that around 15 percent of households in the United States had a net worth of zero or less.
For some people, filing for bankruptcy can overcome debt payments, but not all types of debt are written off in bankruptcy.
What's more, it can affect our ability to borrow money in the future. Devising a debt repayment plan might be a better choice.
4. Consistently owe with a credit card
The use of credit cards for all or most of our needs may indeed look fine, as long as we can pay off the balance in full every month.
If not, or we only make minimum payments, the remaining balance will continue to flower and grow exponentially.
Credit card debt does not mean bad, but it is a sure sign that we are actually spending money that we don't really have.
Consider consolidating our debt with a personal loan or a 0 percent balance transfer card.
5. Rents for residences exceed 30 percent of income after tax
A rough guide to housing rental budgets is 30 percent of income after tax.
For example, a person with a monthly salary of Rp. 7 million after tax deduction, ideally spent less than Rp. 2.1 million per month on living expenses.
This can be difficult to implement if we live in cities with high living costs, but this is a good benchmark for achieving financial independence.
6. Buy items to impress friends
If we buy tickets to each festival and participate in activities that spend money only because of friends, then it can make expenses swell.
Moreover, social media worsens spending because of uploads that show the high lifestyle of a person.
Even though we don't necessarily know the financial condition of each of our friends on social media. It could be worse, but they try to impress their followers on social media with uploads about "wow" lifestyles.
7. Not saving at all
Saving for retirement must always be part of our budget, even since we first worked.
Maybe we have convinced ourselves that we can't save because we don't make enough money or the cost of living is too high, but we may just spend too much money.
There are many useful applications that we can use to look carefully at expenses per month. So that it can help us choose one or more expenses to reduce or eliminate them altogether.
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