Budgeting & Saving Flashcards
What is a budget
a plan that helps you manage your money. It shows you how much money you have, how much money you need to spend on different things, and how much money you can save or use for other goals.
What is the 50:30:20 rule?
The 50/30/20 rule suggests that you spend 50% of your income on your needs, 30% on your wants, and 20% on your savings. This way, you can balance your money and plan for your future.
Increasing your income
Ask for a raise or more hours at your current job.
Look for extra jobs or chores that you can do for money, such as babysitting, mowing lawns, or selling crafts.
Sell things you don’t use or need anymore, such as clothes, books, or toys.
Save your change and cash it in at a bank or a coin machine.
Ask for money or gift cards as a gift for your birthday or other occasions.
Decreasing expenses
fixed expenses are pre-determined by somebody other than yourself. Changing these expenses typically involves certain negotiations with the company or bank itself, and not all negotiations result in expense reduction.
Other expenses, such as some utilities, groceries, or shopping can vary from month-to-month, and are called variable expenses. You have a lot more control over these and they are much easier to decrease.
Ways to save
- Compare prices and look for discounts or coupons before you buy something.
- Avoid impulse buying, which means buying things you don’t need or didn’t plan to buy.
- Use less water, electricity, and gas to lower your utility bills.
- Borrow, swap, or reuse items instead of buying new ones.
- Pack your lunch instead of buying it outside.
- Choose free or low-cost activities for fun, such as reading, playing games, or going to the park.
- Some people automatically deposit a certain percentage of their paycheck into a savings account, so they don’t even have to think about it each time they get paid.
- Others keep a piggy bank or jar at home, where they add their spare change each day or week.
Fixed expenses
Expenses that are the same every month, such as your rent, car payment, insurance, or cell phone bill, are known as fixed expenses. These expenses are pre-determined by somebody other than yourself, like a bank or a company.
Variable expenses
Other expenses, such as some utilities, groceries, or shopping can vary from month-to-month, and are called variable expenses. You have a lot more control over these and they are much easier to decrease.
Shifting the funds
A short term fix to a negative budget balance is to simply move funds from the budget balance that was positive into the negative one. For example, if your savings budget balance was negative, but your needs budget balance was positive, you can take the extra money from needs and move it onto savings. Note that this is only a short-term solution, and we should really try and figure out the cause of the negative balance.
Per unit pricing
While it may seem that you are going to have to be walking around the store with a calculator in order to get the best deal, you may be surprised that most stores have already done the math for you.
Negotiating bills
- Know your options.
Before you call your service provider, research the competition. You’ll be in a better bargaining position if you know the rates and plans that other companies offer. If you can mention a cheaper plan from a competitor, your service provider may be more willing to negotiate. - Be polite but firm.
When you call customer service, be polite and respectful. Remember, you’re asking for a favor, so you want to be as friendly as possible. But at the same time, make it clear that you’re serious about wanting a lower bill. Tell them that you’re considering switching to a different provider if they can’t work with you. - Ask for a supervisor.
If the customer service representative says they can’t help you, don’t be afraid to ask for a supervisor. Sometimes the people higher up have more authority to negotiate. - Be persistent
If you don’t get the answer you want the first time, call back again in a few days. Sometimes different representatives are more helpful than others. Don’t give up! - Look for a promotional offer.
If you’re not successful negotiating a lower bill, ask if there are any promotional offers available. Sometimes service providers will give you a discount for a certain amount of time if you sign up for a new plan or bundle multiple services together. Remember, it never hurts to ask! You might be surprised at how much you can save just by negotiating with your service providers.
Why save money?
- a safety for emergencies
- lose your job or have an unexpected medical bill
- can avoid you falling into debt
- helps you reach goals (e.g. buy a house, buy a car, go out with friends, last-minute present)
- save for college or education or future family
- basically is very helpful for unplanned expenses, and even planned ones. Planned ones to not go into debt for them, and unplanned ones so that you have an emergency.
Planned expenses
Planned expenses are things you know are coming, like rent, a car payment, or a phone bill.
Unplanned expenses
Unplanned expenses, on the other hand, are things that pop up unexpectedly—think a medical bill, car repair, or last-minute gift.
Emergency fund
Emergency fund is a savings account specifically set aside for unexpected expenses. The goal is to have enough money in the fund to cover costs if something unexpected comes up. MANY EXPERTS RECOMMEND HAVING AT LEAST THREE TO SIX MONTHS’ WORTH OF EXPENSES SAVED UP IN AN EMERGENCY FUND. - So basically you count up your living expenses (e.g. phone, rent, etc.) and you calculate how much you pay in a month.
Spending wisely for extra expenses
- Figure out what you need to save for: Whether it’s a vacation, a new car, or a college education, set a goal so you know how much you need to save. In this example, let’s plan on saving for holiday shopping.
- Set an amount and a time frame for your goal: Let’s say the holiday season just ended and you have 11 months left before you need to start shopping for gifts again. This year you spent about on gifts for your immediate family. This means you need to start saving each month, or roughly per week.
- Put your money in a separate account
- Make saving automatic: Consider setting up an automatic transfer from your checking account to your savings account each month or week. It is least noticeable if you schedule it on the same day you are getting paid.
- Adjust your budget, if needed: If you’re having trouble saving enough each month, take a look at your budget and see where you can cut expenses. For example, if you go out to eat twice a week, you could reduce that to once a week and put the extra money into your savings account.
- Be patient: Saving for a big expense can take time, but it’s worth it in the end. Stay focused on your goal and resist the temptation to dip into your savings for other things.
