Money spending habits, good ones are important part of our lives and just like any habit, we can learn through practicing control of our spending habits. Below are 8 money tips that we should thrive to live by in order for us to take control of our spending habits:
1. Pay attention to Interest Rate
When you have loans, try to pay off the one with the highest interest rate. For savings, look for the one with the best/higher interest rate. Always check your interest rates both for savings and debt – compound interest rate can be your best friend (savings) and your foe (debt). Check out this formula for finding compound interest for savings.
2. Have a budget
Net Income is what you budget on! Not money you are expecting somewhere! Not money so-and-so promised you! And definitely, not your credit card! You don’t budget on gross income thus the money your employer or business brings in before all your deductions such as taxes, retirement contributions.
Use the 50/20/30 rule to set up your budget – you divide your net income into three; 50% goes to housing, transportation, utility bills and groceries these are known as Essential Expenses; 20% goes to your debt payments, savings contribution, investments and retirement contributions (some employers deduct these contribution from their employees’ gross salaries) these are called your Financial Priorities and finally, 30% of your net income should go to your Lifestyle Choices, these includes personal care, restaurant, internet, entertainment, gym membership fees, shopping and other miscellaneous and discretionary expenses.