For many, finance can be a very tricky field. In fact, most people end up in debt, or living above their means. While it is ideal to save a minimum of 25% of your income, most people are incapable of doing better than 10%. Now remember that this is a percentage, meaning that it has nothing to do with how much you make, strictly with how good you are at budgeting and saving. Now while it can be difficult to master your finances, it is far from impossible. Remember a good common finance rule, that you ideally should save one dollar for every three that you earn. One of the most common things that prevent people from maintaining this ratio, is that they pay far too much for their housing costs.
Traditionally, most financial advisors and experts usually say the rule of thumb for housing costs is to spend only a third of your income on it. For a lot of people however, this is far too much money, especially when you consider things like car and student loan payments, child support, and business expenses. While each person’s individual budget and housing needs differ, it is more realistic that you should only be spending about 25% of your income on housing expenses if possible.
If you are having trouble spending less than 30% plus of your income on housing, start looking for ways to save. This could include cutting down on electricity costs, being more conservative with food, or simply seeking more affordable housing.
John Labunski is a finance expert who often comments how housing costs can be budget killers.
While everyone wants to save money in order to spend it on stuff that they care about, instead of household expenses, many do not know how to do so. Family finance can be complicated and difficult, especially for those with no experience in it or no guidance. Thankfully, there are a few financial gurus and professionals out there who have developed great ways to save a little money and put your finance in a better place than it has ever been before.
One problem that most people have when it comes to finance, is developing a long-term budget. Many people use a more short-term budget designed to live from paycheck to paycheck. This is problematic because it emphasizes surviving, instead of thriving.
What research and top experts have discovered, is that the budgets that usually save people the most money are long-term annual budgets. In an annual estimate, people usually subconsciously give themselves a lot more financial padding than they intended, leading to more savings and a better financial future. One study has shown that college students overestimate their monthly expenses by 40%, while they overestimate annual ones by only 3%. It appears the more long-term the budget, the more accurate it is.
Creating an annual budget is also advantageous because it allows you to look at things from a more broad perspective. Instead of worrying about if you will be able to pay your bills, you can set goals for how much you can save theoretically by the end of the year, and how much you actually save.
John Labunski is an experienced finance expert who suggests long-term budgeting for saving success.