Managing finances to fulfill primary needs

Often run out of money even though it’s not the end of the month? Maybe you can’t distinguish between needs and wants, so you can’t set a priority scale for primary, secondary, and tertiary needs. Even though all three must be met in a balanced way so that you will not be distraught because you do not have money to meet important needs such as daily meals and paying rent for housing. To avoid this, you can follow some of these financial management tips.

  1. Develop a Priority Scale, Use the 50-30-20 . Formula

First of all, you can prioritize your spending needs in one month. You can follow the advice of a financial expert from the United States, Elizabeth Warren by applying the 50-30-20 formula. The formula is considered ideal for managing finances and allocating income to expenditure items based on priorities, namely 50% for primary needs, 30% for secondary needs, and 20% for tertiary needs.

For example, you will allocate 50% for the cost of daily meals, transportation, electricity, paying rent for housing, and other mandatory expenses. You can allocate 30% as vacation funds, hangouts, eat out, shopping, to pay installments. While the remaining 20% ​​is used to save, invest, and pay insurance premiums.

For example, the salary you get per month is Rp. 10 million. With the 50-30-20 formula suggested above, IDR 5 million of your salary must be used to meet primary needs, IDR 3 million you can use for hangouts, and pay for house or vehicle installments, while the remaining IDR 2 million you can use to save and invest.

  1. Saving at the Beginning of the Month

After receiving your salary, immediately allocate it as needed to save, don’t delay until the end of the month. Because savings are not leftover money. With such a mindset, the salary you get will most likely not be left at the end of the month. As a result you will not be able to save. Whereas having savings is important to meet needs in case of an emergency. So, after setting the priority scale between primary secondary, and tertiary needs, allocate some money for saving.

  1. Don’t Delay Paying Installments

Delaying installment payments will only make the installments pile up and make it difficult for you in the future. Moreover, the longer the delay, the greater the interest you will have to bear. In addition, before deciding to take credit, calculate that the debt you have is no more than 30% of your total income according to the formula mentioned above. Because if your debt exceeds 30% of your income, you will find it difficult to manage your finances because have to take other expenses to pay the installments. As a result, your finances become unhealthy.

  1. Discipline

The financial planning that you make will be useless if you are not disciplined in carrying it out. Even though the plan is deliberately made so that your expenses do not exceed what they should be. The discipline of carrying out a plan that has been made will also help you control the urge to waste and use money for unnecessary needs.

With the four tips for managing finances above, it is guaranteed that all your primary, secondary, and tertiary needs will be able to be fulfilled. You also will not run out of money even though it is still the middle of the month. But you have to really be able to distinguish which ones are needs and which ones are wants. So that between the three needs that you must fulfill, they will not be confused. Finally, you have to be smart to hold yourself back so you don’t get hungry to see various discounts that have the potential to make the plans you’ve made a mess.

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