When it comes to personal finance, the key word is “personal.” There are no one-size-fits-all rules for running your budget, savings, retirement plan, or other aspects of your financial life. However, there are some general tried-and-tested rules that have proven useful for financial planning. These are simple principles that will help guide how you use your money.
Here is a collection of 8 of the best money practices that will help you manage your finances better. You can and should tweak these rules to fit your needs and lifestyle. We hope you find them useful.
1. Pay yourself first. This is an old rule of thumb. Doing this first, rather than last, means you’re more likely to save money instead of spending it all. Even if your budget is tight, as soon as you get paid, put a percentage into savings. Our Target Savings Products like UnionGoal and UnionExclusive are specially designed to help you save for the future.
2. Add your pay raise to your savings account. Once you’ve achieved a salary that funds a lifestyle you’re happy with, don’t move significantly above that. When you get a pay raise, put it into savings rather than spending it. This can help avoid the problem of lifestyle inflation, while growing your savings significantly.
3. When an appliance breaks down and the appliance is over 8 years or the repair would cost more than half the replacement cost, buy a new one. This goes for appliances like fridges, televisions, dishwashers, etc. Get an estimate on the repair cost. If the cost is 50% or more of the replacement cost, you’re usually wiser to just replace the broken appliance. And for older appliances, you might consider doing the same even if the repair costs are lower. Older appliances are more likely to have subsequent issues with other parts.
4. Use 1–2% of an unexpected windfall for a treat, then bank the rest. Whether it’s a gift, an inheritance, or an unexpected bonus, use a small percentage to give yourself a treat and put the rest in your savings account immediately. Give yourself a few months to think about the wisest way to spend that unexpected money.
5. Try the 50/30/20 rule for budgeting. If you’re new to budgeting, try allocating 50% of your take-home pay towards necessities (food, shelter, utilities and clothing), 30% towards lifestyle choices (vacations, gym fees, hobbies, internet plans, etc.), and 20% towards financial goals and priorities (extra debt payments, savings, etc.). This provides a guide to help you budget wisely.
6. Spend about 10–15% of your budget on food. This includes groceries as well as dining out. If you struggle to keep your budget within this range, find places to cut back. As our Elite customer, we have gone ahead to secure discounts at your favourite stores and eateries. Click here for discounts.
7. Allot 2–10% of your budget for personal items. This includes items like entertainment, getting your hair cut, and buying clothing, which should take up no more than about 8% of your monthly budget.
8. Track your problem spending areas. Some people like a very detailed budget. Others, not so much. If you don’t want to track every item, track those areas where you tend to over-spend, whether that’s dining out, buying new clothes, or spending on kids’ items. This can help you control your spending without being bogged down by the details.