The Basics of Budgeting: 5 Ways to Effectively Manage your Money
July 7, 2020 - Money Bits
Disclosure: This article is part of VBit Technologies’ “Money Bit” where we educate our clients on matters Financial Literacy.
Finances can make or break a household.
Yes, there are a number of other issues that result in divorces and separation. Surviving Divorce ranks money issues as the number one cause of divorce in America. Couples who disagree over finances may not even know it and blame other issues. In modern life, money touches a lot of aspects of our daily lives.
Therefore, many couples end with finances as a flashpoint in their arguments. Human connection is mostly founded on superficial things, and those superficial things are mostly built on money.
When one couple is a ‘living in the moment’ type and another is a calculated person financially, there could be conflict unless their communication is great. Issues like trust and communication around finances are mostly not acknowledged until it is too late.
And if you are not married or in any other demographic, don’t think you are insulated from the need for proper budgeting. Americans in this generation are in more debt than any other before them.
Unfortunately, budgeting is a skill that is not emphasized enough in school. It is probably more important to an average person than most subjects they learn. Budgeting is a constant exercise you will conduct through your lifetime, including for any children you bring into this world.
Simply defined, budgeting is the process of estimating your income and your expenditure over a certain period of time. The phrase ‘balance the budget’ is one politicians love to use. It means ensuring your expenses are not more than your income. However, most people, and governments, set out to do this but fail.
Here are some useful budgeting tips:
- Know Your Finances
The first point really captures the essence of budgeting. Budgeting is the same as healthy living or any such exercise that requires you to understand your situation very well. Thereafter, you can cultivate skills like discipline to budget efficiently.
You need to track how your money moves. What happens from the moment it enters your pockets until it leaves?
Many people are afraid to budget because it means cutting out all the fun spending. Look at it as managing the fun spending. In healthy living terms, it doesn’t necessarily mean giving up snacking and that late-night donut altogether. Instead, it means letting go of unhealthy choices some of the time.
After you calculate your monthly income or an approximation, start with fixed payments like a mortgage, debt, and taxes. Move to secondary expenses like optional subscriptions and adjust for miscellaneous spending. If this means keeping your receipts, dining out of home less often, or any other adjustment you need to make, go for it.
The final step is to subtract your expenses from your income to know where you stand.
Doing this might draw a few surprises. Maybe you don’t have to wonder where all your money goes anymore.
Once you can track your finances effectively, it is half the journey to creating a budget and financial redemption.
- Prioritize Your Spending Needs
The logical step after budgeting is to prioritize the important spending needs. The doctrine of delayed gratification should be a consideration. Put first the most important needs. Getting out of debt and fixed asset investments fall into the category of important needs.
When you prioritize your finances you might even free up some money. Use such money to invest in your future. Go easy on unnecessary expenses like having multiple subscriptions of more or less the same content. Wring out every dollar you can that goes into areas that don’t add real value to your life.
- Create a Passive Income Stream
Depending on the type of job you have, balancing your budget on regular income can prove to be a difficult exercise. Over 60 percent of Americans who go through college rely on student loans and start their careers on a back foot. Having a budget surplus takes years if you only rely on a single source of income.
This is why having a passive income stream can be so liberating.
Passive income means an activity that generates income without needing your constant involvement. Such income supplements your regular income and gives your better flexibility and planning ability in your budget.
Bitcoin mining is one such passive income stream. All you need is to purchase Bitcoin mining equipment, find optimum cooling, and cheap power, and you are good to go. This activity relies exclusively on computers and generates consistent income for the miner.
Having a passive income is a great way to build wealth. It might be the edge you need to climb into the middle class or upper class.
- Have an Emergency Fund
No matter how well you budget, some situations can completely sweep you off your feet. An example is a health emergency that liquidates your insurance and eats into your savings. You have probably heard the line that 40 percent of Americans can’t cover a $400 emergency by themselves. This figure illustrates just how much of the population is living paycheck to paycheck.
It makes all sense in the world to set some part of your bonus income for a ‘rainy-day fund.’ Having a significant emergency expense can sink you in debt that you may not recover from for years.
The coronavirus pandemic has shown just how fast job situations can change. Within a few weeks, millions of Americans found themselves out of a job and in need of unemployment benefits. Whether the world gets over this crisis soon or not, you should take the importance of an emergency fund very seriously.
Having an emergency fund, even just a few thousand dollars be a handy investment when you need it. Whether you need to work an extra shift or overtime cut an unnecessary expense or any other strategy, setting apart some money for an emergency fund can be very useful.
- A Long Term Approach
While the basic structure of a budget captures your present situation, the budget should guide your long term financial planning.
The reason you work so hard in your younger days is for you and your loved ones to have a better future. Therefore, the decisions you make should capture this aspiration.
Opening a 401(k) account with your employer is one way to plan long-term. Investing this way has proven to be helpful for many Americans.
Similarly, invest in assets that appreciate over time. The best performing asset over the past decade was Bitcoin. It doesn’t have to be the most popular investment on CNBC but the results speak for themselves.
Analyze such options in the market and plan efficiently. There is nothing to lose from having a long term approach. If you get excited planning for a vacation and such long term considerations, planning for your future should excite you even more.
Mine Bitcoin, Build Your Way to Financial Freedom
Budgeting is essential to having a stable financial situation. To get ahead, however, you need to have more than just budgeting skills. Creating a crypto passive income can make your life a whole lot easier.
Mining Bitcoin has proven to be a powerful passive income stream. Bitcoin mining is the process by which sophisticated computers (ASIC rigs) confirm Bitcoin transactions and in the process get rewarded with new Bitcoin.
Purchasing such equipment allows you to earn Bitcoin without any hassle. Why doesn’t everyone do it? You may ask.
Well, there is the tiny detail that the equipment consumes high amounts of electricity and generates heat. Mining solo is unsustainable.
Enter VBit Technologies.
VBit is an equipment reseller that also provides hosting facilities with optimum cooling and cheap renewable power. Mining with VBit improves the efficiency and profitability of your mining operation without the logistics on your part.
Purchase mining equipment from VBit Technologies today and build your wealth towards financial freedom!