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How To Invest and Save Money
Britt Erica Tunick is an award winning financial journalist who has spent the past 17 years writing about virtually every aspect of finance. She has mastered the art of boiling down complicated financial topics for readers to understand. |
Creating a budget based on your income, routine expenses, and any money left over can be very useful. How to Avoid Spending Too Much of Your Salary By Britt Erica Tunick Saving money is easier said than done. Let’s face it, if saving money were simple there wouldn’t be so many people so deep in debt. So, if you are among the countless people who find it difficult to save, the first place to start is by examining how much of your earnings you are spending each month. While it should be obvious that the amount you spend should not come anywhere close to what you earn, the odds are good that you are probably spending a larger percentage of your earnings than you even realize. According to most financial advisors, the ideal amount of your salary that you should aim to invest is 20% of your take home pay. Unfortunately, that’s not always possible and most people’s spending tends to ebb and flow. Regardless of how much you are able to regularly squirrel away, it is important to know how much you can actually afford to spend once your key living expenses are covered each month. When it comes to routine expenses, such as rent or mortgage payments, car payments, utilities and groceries, financial advisors suggest that no more than 50% of your salary should be spent on these things. If your spending in these areas exceeds 50% you should probably revisit these expenses and see if there is anywhere you can rein in your spending. While the idea of cutting back is never pleasant, there are often areas where cuts that can be made that will have minimal impact on your lifestyle such as scaling back your cable bill by eliminating unnecessary premium channels, or limiting the number of times you eat out each month, even if you start brown bagging it just a couple times each week instead of buying lunch during your work day. Then there’s your expendable income. While it is easy to consider anything you have left after your routine expenses as being readily available, spending everything you make is not only unwise, it can be dangerous given the likelihood that you will be hit with unexpected expenses or emergencies. One of the simplest ways to avoid spending everything you make is to automate savings and retirement investments so that they are automatically removed from your paycheck each month, or by setting up automatic transfers from your bank account on the days that your paycheck is deposited. Not only is automating your savings a good way to ensure that you don’t spend everything you make and to avoid getting yourself into financial trouble, it is an easy way of determining how much of your salary you can really afford to spend each month without getting into debt. |
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