One of the most important aspects of being an adult is managing our finances, though it is one of those things we learn the hard way. A key element to successfully manage your money is: budgeting. Budgeting is all about being intentional with where your money goes. It’s a crucial step towards a healthy financial life, but no budget is simple. We all have to learn to create one that works for us. When you find a great budget that works for you, it can be life changing.
How can budgeting help?
A survey conducted by the American Psychological Association shows that money-related stress in 2022 is at its highest since 2015. Creating a budget will help you manage your cash, reach your financial goals and lead a less stressful life. Most people save too little and spend too much without knowing where their money really goes. By knowing where your money is going, this will guide you in understanding and evaluating your relationship with money. There are several tactics you can utilize to create a clear picture of where your money is going.
- Organize your income using the 50/30/20 method.
Popularized by Senator Elizabeth Warren, the 50/30/20 budget rule is so straightforward that it’s a great option for budgeting beginners. The 50/30/20 budget is a good guideline for covering the major spending categories. A study from 2022 showed that 61% of Americans live paycheck to paycheck, which is not only stressful but also not a sustainable way of living. It suggests using 50% of your after-tax income toward needs, 30% toward wants and 20% toward savings and debt. Start by calculating your monthly income. Then, calculate your 50%, 30%, and 20% categories. percentages of this number. Plan your budget around these numbers. If you stick to the budget, this straightforward plan creates a manageable budget to help you reach your financial goals and successfully manage your money.
2. Consider using the Zero-based Budgeting Method.
If you want to know where every dollar you earn is going, you may like zero-based budgeting. The goal is to match your income to your expenses each month. The key to this strategy is to treat your savings goals as expenses. By subtracting your expenses from your income, you can control your spending by determining where every dollar goes before you spend it. That doesn’t mean that your bank account is empty. It simply means that your income minus your expenses equal zero. The goal of this strategy is to give every dollar a job so there’s no money wasted or left over.
3. Use a budgeting app.
When you need extra help staying on top of your spending, a budgeting app can help you track your money right from the palm of your hand. The right app for you is one whose features and costs best suit your financial needs. A few popular choices include:
- Mint
- PocketGuard
- Wally
- You Need a Budget
4. Prepare for surprises.
Set aside a little bit of cash to cover miscellaneous expenses each month and make regular contributions to an emergency fund. That way you can handle an unexpected car repair or other emergencies without taking on credit card or loan debt. Typically, the rule of thumb is to put away at least three to six months’ worth of expenses, or 10% of your net income. Only 68% of Americans can cover an unexpected $400 expense. Every household should prioritize creating an emergency fund in case of unexpected medical expenses, job loss, or any other unseen monetary stressor.
5. Prioritize paying off debt.
It’s important to commit to a plan and stay motivated in order to cut down your debt. If it becomes too challenging to keep up with various payments and due dates, consider debt consolidation. Debt consolidation involves taking out one loan to pay off several existing loans or debts. Having to focus on one payment instead of multiple will help save you time and money.
How Hippo Can Help
Hippo Lending has helped hundreds of healthcare professionals consolidate their debt so they can move forward with a life free from the stress of an overbearing financial burden. Our company was founded on the principle of helping healthcare heroes accomplish their dreams. We only serve healthcare professionals, and that specialization allows us to offer unique funding opportunities that others can’t. And since we’re a commercial lender, our loans are not reported as taxable income, meaning it doesn’t show up on your credit score. Join the thousands of healthcare professionals who have bettered their future with funding provided by Hippo Lending.