Most of us are not satisfied with our income – no matter what, we always yearn for more. However, it is imperative to learn how you can make your income work regardless of your paycheck size.
Here are a few tips:
Structure a budget
Your budget should summarize all your living expenses, so you can compare your total spend against your take-home pay, cut out or reduce any unnecessary expenses and figure out a reasonable savings plan. It includes fixed expenses like rent, mortgage, insurance, childcare costs, etc., along with variable expenses like medical costs, food & groceries, and so on. Discretionary expenses like entertainment, eating out, shopping, etc. should be considered too. There are loads of free budget planning tools online.
Open a high yield-savings account
Start putting money away in a high-yield bank account that earns interest while you save. Interest rates, fees and conditions vary depending on the bank and the product. Online-only banks tend to offer higher interest rates because they do not have the expense of maintaining branches, but this is not always the case.
Regardless of the debts you have, whether it is credit cards, student loans, or any other type, it is advisable to remove this burden as fast as possible, so you can take better control of your finances. Every dollar you use to pay down your principal saves you from having to pay interest on that sum and that can mean being debt-free years earlier than expected.
Use reward credit cards
Credit cards are best avoided, but there is a caveat. If you choose a card with rewards appropriate for your lifestyle, such as frequent flyer miles, cashback, gift cards, and more, it can result in savings in the long run. Most credit card companies offer specific cards that come with rewards for spending. If you pay off your entire balance each month during the interest-free period, you can reap the benefits of these rewards without paying a dime in interest. You could funnel your spending via credit card and rack up some serious rewards if you are diligent and pay off the balance in full every month. But this is not a good idea if you are prone to building debt or have existing debt.
Invest in a 401k or IRA
401ks and IRAs are types of investment accounts where your savings are invested in the market and have the potential to grow exponentially. Both are great options for tax-advantaged retirement saving, as you do not pay any taxes on either the money invested or the growth of your investments. The latter is an employer-sponsored retirement plan, so whatever percentage of your pre-tax pay goes into 401k, your employer matches your contributions 1:1. In case you are self-employed, or your employer doesn’t have provision for 401k, start saving for an IRA. Assets in IRA are not taxed till withdrawn (some offer tax-deductible contributions for people who do not participate in an employer-sponsored plan).
It takes a lot of effort to ensure you live within means, save some money on the side, and do not exceed your income, so be patient!