Photo : Koinwork
Managing expenses doesn't mean sacrificing your quality of life. Instead, this step focuses more on making wise decisions in each of your expenses. Here are some effective steps to manage your expenses.
1. Prepare a detailed and realistic monthly budget plan
For budget allocation, you can try the 70/20/10 method, which means 70% of your monthly income for living expenses, 20% as savings funds, and 10% for investment funds. Another budget method option is 40/30/20/10, meaning 40% of income to meet monthly needs, 30% to fulfill obligations such as paying installments, 20% for savings, and 10% for giving such as zakat or tithe.
2. Reduce Unexpected Expenses
Unexpected expenses such as sudden repairs or medical bills can disrupt your financial plans. To deal with this, start building an emergency fund. Set aside a portion of your income each month for this emergency fund, so you're prepared for unexpected situations without ruining your financial plan.
3. Avoid Impulsive Buying
Impulse buying is the biggest enemy of unexpected spending. Before making a purchase, give yourself some time to think. Ask yourself whether you really need the item or it's just a temporary whim. If you still want to buy it after a few days, reconsider whether this item fits your budget.
4. Limit the use of credit cards
Credit cards can cause problems if not managed wisely. Try to pay your credit card bill in full every month to avoid high interest charges. If possible, limit credit card use to emergency needs only.
5. Manage Routine Expenses Wisely
Routine expenses such as monthly bills need to be managed wisely. Consider looking for a service provider that offers more affordable prices without sacrificing quality. Additionally, consider bundling services where possible, such as streaming services or insurance.
6. Adopt a Frugal Lifestyle
Adopting a frugal lifestyle not only helps you manage your expenses, but also supports environmental sustainability. Consider using public transportation, saving on energy use at home, and buying high-quality, long-lasting items instead of affordable products that break down quickly.
7. Set aside funds for investment
Investing is a great way to maximize your wealth growth potential. Allocate some funds from your savings to invest in instruments that suit your risk profile. Long-term investments can help you achieve long-term financial goals.
8. Manage Funds for Education, Retirement, or the Future
Apart from investing, also consider managing funds wisely for long-term goals such as children's education, retirement preparation, or building a foundation for a more stable future. By planning carefully, you can avoid major financial stress when the appointed time arrives. Choosing the appropriate savings or investment option for each goal helps you move with confidence into different phases of life.
9. Find Additional Sources of Income
To manage your expenses well, you also need to look for additional sources of income so you can achieve your financial goals according to the time targets that have been set. One way is to develop additional skills that can generate side income. By diversifying your sources of income, you can secure financial stability in a variety of situations.
10. Have insurance
Financial balance in the future is not only limited to saving expenses and investing, but also involves protecting against unexpected risks. Why? The reason is, insurance and financial protection are included in the financial pyramid. Insurance policies can manage unexpected and emergent expenses.