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Budget hacks: 2021 edition

Spending money wisely is a New Year's resolution that never gets old

Let’s face it, budgeting and money management can be overwhelming and tedious. Trying to figure out how best to spend and save my money is not in my top 10 list of favorite things to do, but as a person trying to survive in the adult world, it’s absolutely essential. 

Making a budget—and sticking to it—can help you go through life with less worries because you’ll know exactly where your money is going and how much of it you have left. If you want to improve your budgeting practices, here are some rules and tips to keep in mind. Take note though, that not every rule in here will work for you and your lifestyle. If there’s one unchanging piece of good advice, it’s this: it’s better to save more than spend more. Now let’s get to it.

10 percent plus 5 every year

Usually, retirement doesn’t happen until people are well into their 60s, but that doesn’t mean us young ’uns can’t start early. The key to a big retirement fund is to start it as soon as you can.

When you start asking around how much you should save for retirement, people often say you should set aside 10% of your annual income—that’s a good place to start. However, let’s go back to our basic economics classes and remember that the cost of living goes up almost every year, so just 10 percent every year until you retire, won’t be enough. If 2021’s your first year of setting aside a retirement nest egg, then go with 10 percent but you better make sure that by 2022, you’ll be saving 15 percent, and then 20 percent by 2023 and so on. 

A retirement fund from BDO can also help you stick to and achieve your retirement goals since the bank can create a personalized investment plan that fits your income and lifestyle. Being disciplined with setting aside money for your retirement ensures that in the future you will be able to enjoy a comfortable retirement that covers leisure, purchases for younger family members, and of course, medical bills. 

50/30/20 rule

American Senator Elizabeth Warren created the 50/30/20 rule for saving back in 2018, but it still holds up a year and a pandemic later. This rule can help you figure out how much to spend for your immediate needs, treat yo’ self purchases, and your very important savings. 

Here’s how you do it: look at your salary annually minus the deductions like tax, healthcare and social security. The amount you’re left with is your income and your starting point for the 50/30/20 rule. Your essential needs (like rent, food, transportation, bills) should only take up 50 percent of your income. 

The next 30 percent is reserved for your “wants” which is every other purchase that’s not part of your basic needs—Netflix subscription, money for dates, online shopping purchases. Looking at your money in this way can also have you reflecting on your spending habits. It’s never too late to practice delayed gratification and put off buying those trinkets until absolutely necessary.

The remaining 20 percent should immediately go to your savings account. An Optimum Savings account can help you set aside money with higher interest rates, so you can get the most out of your money. Your savings can help fund your dream vacation, retirement plans or even help you start a side business. 

6-month emergency fund

I learned about the 6-month emergency fund on the day of my college graduation. Like good parents looking out for their child, my dad told me to start saving six months’ worth of money “just in case.” It turns out that this “just in case” savings can come in handy for emergencies or when you’re suddenly cut off from your main source of income.

2020 is a rocky year when it comes to money—a lot of people lost their jobs because of the pandemic and a lot more faced health-related expenses that weren’t accounted for at the beginning of the year. Having a 6-month emergency fund might just help if a year like 2020 comes up again. Budgeting for insurance can also be a supplement to your emergency fund. Investing in protection and life insurance can help you out of a tough spot when life takes you by surprise, so when budgeting for the new year, factor these backup savings in.

 

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