Today I want to share with you 3 hacks that helped me tremendously with handling money and saving 6800 CHF last year. Without further ado, here they are.
1. Envelope Method
I love this method because it is so easy and simple. It controls my spending habits by providing me with a limited number of physical money.
What is it?
So basically, you take an envelope for every expense or saving you have and every month you put money into it. To organize the envelopes visually you can color code them (blue for rent, green for groceries etc.).
Let‘s say, you get paid 2000 dollars (francs, euros etc.) a month and you know 1500 dollars is your rent. What you now do is, withdraw 1500 dollars from your account and put it into the envelope for rent. The money in this envelope can only be used for rent. Now you only have 500 dollars left for your other expenses (2000-1500). You know on average you spend 100 dollars a month on eating out. So, you withdraw 100 dollars from your bank account and put it into the “eating out” envelope. This money, like for the “rent” envelope, can only be spent on eating out. If there is no more money in the envelope, you’ll have to cook or eat at a friend’s house etc.
The remainder of 400 dollars would be divided into other possible expenses. Make sure you align your envelopes relative to your events, so if you know you’re are going to three dinners this month, put some more money into the “eating out” envelope. The whole concept goes for all other expenses like groceries, phone, savings etc. (hint: You will find a list of possible expenses in the printable in my free resource library.)
What if I don’t live alone?
If you have a roommate or you’re in a relationship you can still make the envelope method work. Just make two envelopes (or more depending on your circumstances). Let’s say you agreed to only spend 200 dollars/month on groceries. If you know that your roommate goes grocery shopping more often then you, her envelope would have 150 dollars and yours only 50 dollars.
The best thing you can do is automate all your fixed expenses. Those include expenses that are the same every month all year round, like rent for example. In this way you don’t get tempted to spend money that should finance your essential needs. On top of that, you don’t have to think about those expenses, since they are taken care of. It also takes away the risk of overspending and having to pay an overdraft fee. Most banks provide an e-finance service of some sorts, where you can see your spending habits and automate your fixed expenses on your own.
3. 50/30/20 Method (needs, wants, savings)
The 50/30/20 rule is a good method that can be applied to all income classes and transformed as pleased.
What is it?
The 50/30/20 rule splits your income up into 3 categories: Needs, Wants, and Savings. Most people use 50 percent of their income for bills. 30 % for their wants and 20 % for their savings or debts. What your ultimate goal should be is maximizing the money for savings or investments and minimizing the money you spend on your wants and even cutting down on your needs. Of course, you’re free to set the percentages as you please and your income allows. For example, 60/30/20 or 40/15/45.
Let’s say you earn 2000 dollars a month. Using the 50/30/20 rule would mean, 50 % of that money goes to fixed expenses like rent, health insurance, transportation etc. That means a 1000 dollars go to your fixed expenses. Next, you have to deduct 30% for your wants like clothes, cosmetics, pocket money etc. 30% from 2000 dollars is 600 dollars reserved for your wants. This leaves you with 400 dollars for savings or debts.
I hope this tips and tricks help you to tackle your finances and save money. What are your money hacks? Leave a comment down below and don‘t forget to check out my free monthly budget planner in my free resource library.
Until the next one.