How to Budget & Save Your Money - Three Types of Income Stages

Photo © rawpixel 

Budgeting will probably be one of the most challenging things you learn how to do as an adult. As you leave your parents nest, you learn very quickly about managing your income and how to maintain a standard of living with the income you've earned. There are stages of learning how to budget, based off your current income from learning about savings for emergencies, investing to live after retirement, getting out of debt and making sure your finances match your lifestyle. 

How to Manage & Save Your Money Based on Your Monthly Income.jpg

$20,000

If you just graduated from college or jumped in the workforce, it takes time to adjust how to make more than minimum wage. When making $20,000 a year, it is vital to learn how to budget. Yea, I know it doesn't sound fun, but lower earners must plan for any occasion. According to Iona Bain of Young Money Blog, she advises women to record their finances over one week and work out exactly what is coming in and what is going out.

There are tons of free apps and affordable notebooks that give you the luxury to record your financial movements. Learn to manage what you are spending and what you will earn to cover those expenses. Do you really need a Netflix account? What about those bi-weekly trips to the nail salon? 

The quicker you prioritise and decipher what needs are versus your wants, you can quickly see that budgeting isn't as hard as it appears to be. 

How to Manage & Save Your Money Based on Your Monthly Income 30,000.jpg

$30,000

When making $2,600 a month, it’s easy to take advantage of more money which means more spending. Focus on building savings that are geared towards investing in your retirement and wealth for future years.  With the current concerns over pension plans and the possibility of retiring later in Bermuda, has granted employees the opportunity to build extra income for later in life.  If you are in the U.S., you can even plan to invest in your company's retirement fund by just allowing one per cent of your salary into the employer retirement plan. 

Learning about mutual funds and how to invest correctly will also be rewarding in the end. 

Of course, starting off small is better than leaping when it comes to investing your funds. Peer-to-peer lending platforms allow you to give little bursts of capital to businesses or individuals while collecting an interest rate on the return. Mutual funds are investment securities that will enable you to invest in a portfolio of stocks and bonds with a single transaction, ideal for new investors

How to Manage & Save Your Money Based on Your Monthly Income 30,000-2.jpg

$50,000 and up


The bigger the blessing, the greater the lessons. Is that a saying? Or did I just make that up? If you have two household incomes and you are both averaging at least $50,000 a year or more, I would assume you have a mortgage or in the process of looking for a home. 

Home mortgage interest rates have increased, and it's not so easy managing various expenses. You might want to consider investing more of your income to get a better return before purchasing that house or while you are seeking a mortgage. You will have better chances of getting a lower interest rate and you'll feel less stressed about making ends meet.  


Managing Debt

The biggest obstacle with debt is figuring out where to start when paying off student loans, a credit card, and maintain a car note into a monthly budget. Paying off debt may seem overwhelming at first, but it is best to decide on what should be paid off first. Your student loan provider will work with you on how to consolidate your loans or arrange a different minimum of payment. The same thing applies for a car note, start by paying larger amounts than the minimum amount you owe; this will lower your interest rates and ultimately pay off your debt quicker. 


The best thing to remember is, you don't have to live paycheck to paycheck if you start budgeting and saving according to your income. Review your monthly expenses, start saving a little more, and invest in you and your children. Investing takes a lot of research, so start off slow. Organise your debt and make more significant payments.  Good luck on improving your finances.