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While the last three months have been a whirlwind of uncertainty, West Virginia and beyond have begun moving forward with our new normal. The events surrounding COVID-19 have left many people taking a second look at their finances, and as we move forward, some may still have a future of “what ifs” on the brain.

If this sounds like you, here are 3 money management tips to help you feel more financially secure both now and in the future. 

Review Essentials vs. Non-Essentials

Figuring out how to manage your money each month can feel overwhelming, especially if you are re-evaluating your current budget. The easiest place to start is with a review of essential vs. non-essential expenses. Itemizing each category will give you a bird’s eye view of where your spending occurs and where you can cut back.

First, prioritize what you consider essential. These are fixed and variable expenses that must be paid every month and have little to no wiggle room within your budget. Some of those expenses likely include:
• Rent or Mortgage Payments
• Car Payments
• Home Insurance and/or Auto Insurance
• Loan Payments
• Utilities
• Groceries
• Gasoline

Once you know how much of your monthly income is allocated to essential expenses you can begin reviewing your non-essential expenses for potential savings. Non-essential expenses are those that you should be able to comfortably cut back on. Some examples of these expenses include, but are not limited to:
• Shopping for Pleasure
• Dining Out
• Coffee Runs (This adds up!)
• Gym Memberships
• Personal Care like Manicures, Spa Services, Expensive Haircuts
• Phone bill* (This may be considered essential, but there is money to be saved by downgrading your services.)
• Streaming Services like Netflix, Hulu, Disney+, Apple TV, etc.
• Cable and Satellite Subscriptions
• Meal Subscriptions like Hello Fresh and Blue Apron
• Health and Beauty Subscriptions like Ipsy, Birchbox, Dollar Shave Club, Fab Fit Fun, etc.

Consider The 50/30/20 Rule

So, you’ve reviewed your spending on essential vs. non-essential expenses – now what? For additional help in crafting the right budget for your future, consider using the 50/30/20 rule as a good starting point. The 50/30/20 rule helps you craft a budget based on three spending categories:

• 50% of your income should go towards things you NEED. These are the essentials, like your rent or mortgage, utilities, transportation, childcare, groceries and insurance.
• 30% of your income should go towards things that you WANT. These are the non-essentials, like cable, subscription services, phone, personal care, shopping, travel, and donations. 
• 20% of your income should go towards your SAVINGS, or paying down debt. Some examples include saving for your emergency fund, paying credit card debts, paying loans, and saving for retirement.

While the exact percentages may not align with your lifestyle, this is a great rule of thumb to help you find the right balance within your own personal budget.

Plan For Your Emergency Fund

One of the best things you can do when laying the groundwork for your financial future is to plan for the unexpected. An emergency fund can act as a safety net in uncertain times or trying financial situations. If you’re thinking of adopting the 50/30/20 rule, consider contributing the full 20% of savings to your emergency fund right now if you don’t already have one.

If committing to indefinitely saving a percentage of your paycheck isn’t quite your speed, you can always create a savings goal based on how much you want to save, and how long you’re willing to do so.  Using a savings calculator is a great way to create a savings plan. Financial experts recommend that your emergency fund should hold 3 months’ worth of expenses. Once you have figured how much that is for you, try using our savings calculator to create a savings timeline and goal for yourself. 

Don’t worry if saving 20% of your paycheck or 3 months’ worth of expenses is too much of a stretch for you. It isn’t always so simple to suggest the right amount of savings for your personal budget. Small savings add up over time, like in our most conservative savings challenge. If you’re able to save between $0.01 - $3.64 per day, you could save $667.50 within a year! Any savings contribution you can make is a step in the right direction and will help you build a more secure financial future.

Sources:
www.forbes.com