3 Easy Ways To Take Control Of Your Finances
I recently started sharing my very honest financial journey with you guys on this site, and while I will continue to still update you on my journey at least once a month, there’s a lot of other personal finance information I have taken in that help me, and a lot of this information isn’t common knowledge, or at least it’s not information that is pulled in one place very often.
I have recently read a ton of books on habits, mindset shifts, and finances. I have also spent a lot of time on websites like the financial diet and listening to podcasts on financial wholeness, and while a lot of different sources have a lot of contrary information, there are certain things that are universal and some things that make more logical sense than others. This post is the first culmination of the best information I have found so far.
1. The 70/15/15 Percentage Budget (or the 50/20/30)
One quote I read somewhere said something along the lines of “you have a budget whether you realize it or not,” and I tend to agree. I’ve also heard the one that says if you aren’t in control of your finances, they’re in control of you.
While my money controlling me seems a little extreme, I do believe in the need for a budget, and the one that makes the most sense to me starting out is the percentage budget. Different sources give different breakdowns, but basically it divides your expenses into groups and assigns a certain percentage they should take from your income. Nicole Lapin’s book Rich Bitch uses the 70/15/15 breakdown while Erin Lowry’s book Broke Millennial uses a 50/20/30 approach instead.
Basically, this budget breaks all of your spending down into three categories (direct from Rich Bitch):
Essentials (70%)
Endgame (15%)
Extras (15%)
Other sources call these categories different things, but here’s how it works: all bare necessity living expenses, like your rent or mortgage, food, transportation, utilities, and insurance should take up approximately 70% of your income.
Future savings, like your 401(k) contributions, debt payoff, and savings should be approximately 15% of your income.
Fun things, like movie nights, amazon orders, and subscription services should take up the other 15% of your income.
The best way to figure this out is to look at what your monthly income is (I use my income after taxes but before deductions, since insurance and 401(k) comes out of my checks automatically and they are part of the categories) and look at every expense you have in a month (bank statements are helpful for this part). Separate your expenses into these categories and see what percentage of your income falls into each box. Now you have an actual percentage and an idea of what you want to work on to rebalance your budget in the future.
The percentages are guidelines and goals, and a 50/20/30 split or 60/20/20 split may work better for some people. I personally like the 70/15/15 split right now due to my husband and I both having car payments that take up a lot of that essential budget, but that may change when I finish my degree and need to focus on paying off student loans.
By setting the percentage-budget goals, you are taking charge of your personal finances and becoming aware of what you are spending in each category. It also allows you to set some goals, like earning more income by starting a side business or decreasing how many things you pay a monthly fee for (goodbye cable).
2. Do a no-spend period
This one is somewhat self-explanatory. I am going to be doing this for the entire month of May, so start today if you’d like to do it with me. My state being on lockdown and me being stuck at home has led to a lot of Barnes and Noble, Amazon, and Sephora orders (thank you spring sale).
It went a little overboard, so to get my spending back under control, for one month I will be deleting shopping apps from my phone, leaving my laptop in the office instead of taking it to my room after “work”, and letting my husband keep me accountable by moving all money into our joint account so he’ll know if I break my streak.
Do whatever works for you, but basically I will spend money once a week when I go to the grocery store on Wednesdays and will stick to my prepared list. If I need something from amazon (we get our dog treats from there along with a couple other personal hygiene items) my husband will have to order it, and I have a spending tracker from Erin Condron where I write everything down so I can check myself as well. An excel spreadsheet can work, too if you’d also like to track your spending.
I’ll make sure to update you guys at the end of the month on how this all went in May, but it is a good idea to develop this awareness and see where your money is really going.
3. Use an app (or tracker) to help you
This post is not sponsored, but I do use Mint to look into my transactions and account information. The app allows me to see all transactions from both my individual accounts and my joint accounts with my husband.
I can set savings goals associated with one of the accounts so I can watch it grow, it connects to my car loan and other accounts so I can see my total net worth, and it even lets you login to Hulu and other small bill accounts so you can see what bills are coming out when and stay on top of it.
I am sure there are other apps for this, but it is really nice to see everything in one place. I am using a high yield savings account to build an emergency fund right now and can track the success on Mint which keeps me motivated, and I love that I do not have to login to multiple accounts to check out transactions and balances.
Also, its free, and you can get your credit score on there as well, with no fee. It really is an all-in-one-place type of app.
There will be more of these posts as I continue exploring personal finance and sharing my journey with you, but I hope this information helped someone take a little more control of their financial life, too. If you have more tips, please leave them in the comments, I would love to learn from you as well.
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-T