If you’re interested in getting control of your financial life, you’ve probably already tried budgeting, you might even be using it to some success. However, one of the common issues people have when budgeting is that they can’t stick with it for a long period of time. When life starts to get complicated, it’s hard to stick with a budget consistently.
This can be changed if you simplify the personal finance categories which you’re using to create your budget. Let’s talk about how this is done…
The Basic Simple Personal Finance Categories
I’ve found that there are four basic edulize personal finance categories that make it easy for you to budget your money. They are: personal expenses, giving, investing and reserves. When I say “reserves” I’m talking about money that you set aside for building an emergency fund, for making cash purchases instead of using credit cards or other means of borrowing money, and for special, but major activities.
Now, in order to use these personal finance categories effectively, it’s important that you order them according to what’s most important. For example, if your goal is to set up reserves for an emergency fund before you start investing or giving, then the reserve category is the first place to put your money. This means that before you pay your expenses, invest any money, or do any of your charitable giving, you put a designated amount of money away in the reserve account.
Now, personally I put them in the order of: giving, investing, savings and personal expenses…in that order. This is because of my priorities, but it’s important that you spend your money according to your priorities. The more you spend your money according to your priorities, the more control you’ll have over your financial life. That said, I suggest that you DON’T place personal expenses as your first category.
The reason for this is if you pay your expenses first, you’ll likely never get into the habit of investing or reserving money. Many people often say that they’ll start investing or setting aside something when they “get the money.” You and I both know that when you wait for the “right time” to do something the right time seems to never come. You just have to do it now and correct course as you go.
Getting Started With Your Personal Finance Categories
What is your most important priority when it comes to your financial planning? Is it saving money, getting out of debt, investing or something else? Write it down and make a commitment that you’re going to put 10% of your income into the category which is most important to you, and don’t falter. Get started on this today, and you’ll see how these simple personal finance categories can make your financial life easier.
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