Shopping as an activity is relaxing for some while stressing for some others. The deciding factor for this difference in experience? A shopping budget!
On a serious note, buying capacity of an individual has a strong and direct influence on the lifestyle adopted by that person. That being said, there are several big-ticket items necessary to maintain a basic but decent lifestyle. For example, kitchen appliances like refrigerator, cooking range, blender, etc. household items like furniture, vacuum cleaner, or even a personal laptop or phone can take a huge cut from your paycheck (at times 2 paychecks!).
On a larger scale, it could be wedding expenses, buying a house, or sending your kid to college and the possibility of medical expenses cannot be ignored. So let's take one step at a time. There isn't any formula that will keep a step forward when hit by these expenses. But planning your finances in the right manner can help you survive the blow.
Analyzing Your Needs
"Do I really need to buy it?"
Your purchase journey should begin only if the answer to this question is positive. Often the urge to buy something is stronger than the actual need for it. We can convince ourselves that we deserve the expense, or that we can immensely afford it, and learn not to be guilty about it. Hence, we need to stop ourselves and ask if the said purchase is utterly essential. This simple question might save you from committing an unnecessary expense. Analyze cost against a benefit or are you already in possession of something that can be used as a substitute? It would not be wise to overburden your wallet just for a shopping experience.
Expense Fund
In case you are aware of an upcoming expense that is going to take on your savings, you can start by keeping aside some extra savings from your paycheck dedicated wholly to this expense. An expense fund could protect your savings account to be used for some better purpose in the future and your investments too can remain untouched.
Time your Expenses
Black Friday Sale just walked past us with great deals all around. Big-ticket household items or kitchen appliances can get tagged with huge discounts which can save you a lot. You can stall buying these items till the sale season arrives depending upon the urgency. A $50-$100 discount behind every product can certainly have an evident impact on your wallet.
Emergency Fund
Medical expenses, car repairs, and home repairs can burn a hole through your savings unless you have a sturdy insurance plan to back you. Even so, out-of-pocket expenses could raise concerns for many individuals. For times like such, a percentage of your paycheck could go to emergency funds. Keeping in mind the medical and ancillary expenses, these funds could prove to be a savior from filing for bankruptcy.
Home & Education
These are the most critical and hence can be categorized as life-turning events. Buying a home can be your dream expense and requires a whole lot of planning as you invest your funds and borrow a loan to finance the gap. This could be extremely tricky as a home loan costs you interest and generally is long-term debt. If you are thinking about buying a house, you will want to take a careful look at your finances to make sure you are ready for this new commitment.
Similarly, education comes at a huge cost, and hence student debt is an entangled issue country-wide. It is recommended to seek financial advice from an expert who understands the industry norms and conjugates them according to your requirements and ability. To view some effective tips for financing your education, please click here.
Expenses cannot always be avoided and hence planning your finances in the right manner can let you cherish your money's worth instead of stressing over the bill amount. The primary motivation for earning money is ultimately linked to the need for a comfortable and joyous lifestyle. Let us know your views on managing expenses efficiently in the comments section below. Also, if you're looking for help on how to manage your finances, be sure to check out our resources page for more information.
