Many American families earn at least $78,000 every year. This can be a lot of money depending on the lifestyle of that individual family. However, for many, this can might not be enough. Utilities, mortgage, daily allowances, and meal budgets all consume almost all of this income every year. Many blame the economy for their low salary rate that doesn’t provide enough for them yearly. They ask for at least a $6,000 raise on their jobs.
Millions of Americans seek second jobs to keep their families afloat. However, this shouldn’t be the case because annual household income is calculated so that families should pay for their yearly expenses and save enough for their future. Sometimes is just in the way you handle your finances.
Hiring someone to do your finances might not be the smartest move when you’re only earning an average salary since you might be paying more to your financial manager than what you earn. Instead, you should handle these matters with your own hands. Managing your finances can be challenging at first, but once you’ve gotten used to it, you can do it seamlessly every day. Here are some ways you can DIY your finances every year.
The first thing you should do is calculate your expenses every year. For this, you’re going to need some tools. Some of these tools can be found on the internet. For example, a mortgage calculator is accessible to anyone. Some tools help estimate how much you spend on utilities and meals every month. Having these tools will make this process a whole lot faster.
When calculating your expenses, don’t do it every once in a while or when you feel like it. No, you’re going to have to sit down the entire day and start crunching some numbers on a spreadsheet. What does calculating your expenses do for you? For starters, it will help you visualize how much of your money goes on things that you need to survive. You’d be shocked to see that you can save a decent chunk of money if you concentrate on these things.
For example, the average budget of American families for a vacation is about $500. However, some families still choose to spend over $4,000 on their vacations despite earning the median annual salary. This $4,000 can easily pay two-months worth of expenses. Splurging is one of the biggest reasons why you don’t have savings. Knowing how much your expenses are, you can stop the splurge and concentrate more on saving up.
Pay Your Debts
When calculating your expenses, you’ll have to look into how much your debts cost you every year. It’s ideal to pay them off as fast as you can so you don’t have to worry about penalties or increasing interest rates, but let’s be honest here. No one has the money to pay their mortgage off the bat. So allocate whatever money you have right now to pay off the other debts you have right now that are currently on your budget. This will help you visualize better what you can afford and what you cannot afford. It will also help with the next phase of the plan, which is to plan a budget.
Plan a Budget, and Stick by It
If you have done the previous steps before this one, it’s time for you to plan a budget for you and your family. Once you’ve figured out your expenses and paid some of your debts, you’ll have a clearer view of your financial situation. This is where you’re going to see if you needed that $4,000 trip to Bali.
If you don’t have enough or barely have enough to pay your expenses every year, consider cutting off some subscriptions or maybe skip on a big vacation this year. You can then allocate those expenses into something else. If you have more than enough and want to all of a sudden splurge it into, this time, a $5,000 trip to Bali, stop yourself. You’re going to have a budget for everything so that you can save up some money for your future.
Here is a list of how much an average family spends every year in the US. It is well below the median income of $78,000. If you follow the same budget on this list or maybe even less, you can save up to a staggering $10,000. You might not even need that second job anymore. But remember, your situation might be different. Some things in life don’t go according to plan, like accidents. This should give you more of a reason to save money for your future.
Handling your financials is tough. But sometimes, we tend to overspend most of our budget on things we don’t need. Consider sitting down and crunching some numbers on a spreadsheet. You never know, you might start saving up $10,000 per year by doing so.