Your Salary Keeps Leaking – 8 Tips to Seal the Holes

Financial management is an essential skill that every salary earner must master. No matter how much you earn, failing to create and maintain a reasonable budget will leave you with little to no control of your finances and could end in continuous borrowing every month. It is crucial that everyone earning an income carefully curates their financial lives and deliberately lives within practical limits that match total income. In addition to sticking to a budget, you should learn how to identify leaks and seal them so that there is more money for savings, investments, and other financial priorities. 

Be Sure of Your Net Income

The best way to plan your expenses is to properly calculate your net income. Simply put, this is the total wages you’re left with after all deductions, including taxes, health insurance premiums, and other payments. A common mistake people make is that they focus on their gross pay and end up spending more money than they should. This usually happens to people in the gig economy or self-employed persons because income is somewhat irregular or inconsistent. To be safe, consider finding an online tool that can help you calculate your net income by simply inputting the gross pay.

Monitor Spending

Some people might find this difficult because of the chance that there may be hundreds of small and random expenses each month. However, tracking all expenses is important because it provides an accurate outlook of spending habits and helps to create a priority list. In addition to making this list, expenses monitored should be classified into different categories, such as utilities, groceries, or entertainment.

Limit Entertainment Expenses

Controlling entertainment requires a lot of discipline and sacrifice. To make this easy, you could look out for freebies that increase the value of a payment, so the expenses here are minimal. For instance, some bars allow two drinks for the price of one if you get there before a particular time. 

Many streaming or subscription-based platforms offer significant discounts if you pay for the annual subscription at once when compared to separate monthly payments. If you know you’ll need a stock photo platform for your business all year long, go for the annual discount. 

Likewise, online iGaming platforms like the Megadice casino use cashback and no-wagering bonuses to attract new players. While exciting and engaging, these bonuses can also help users maximize their deposits, reducing the overall amount they need to spend while gambling.

Since entertainment expenses are usually non-essential, you should set a specific budget and fund it with a predetermined percentage of your net income. While this figure might vary depending on individual preferences, some experts advise that your entertainment budget should never exceed 10% of the total net income. To be more precise, 10% should cover everything, including movies, bars, restaurants, massages, or manicure sessions.

Select A Budgeting Method

There are several ways to create and implement a budget depending on individual lifestyle and expenses. One of the most popular is the 50/30/20 budget rule. Here, you allocate 50% of your net income to needs like rent or transportation costs if you have to commute to work every day. You then use 30% for wants like streaming subscriptions and entertainment services, while 20% goes to savings or debt, like emergency funds, retirement payments, etc. 

Another way is to pay yourself first. Calculate all expenses and bills in a month, add a little more for miscellaneous or unforeseen expenses, and use the rest for savings or wants. 

One more option is the envelope budget method. Originally, this required people to put specific amounts of cash into envelopes labeled with expense categories. However, you can do this with third-party wallet apps or a simple spreadsheet. The envelope budget method requires you to stop spending in a particular category once the funds put there for the month are depleted. Where there are leftovers, you may move the funds to a different envelope, save until later, or roll over the funds into the same envelope for the new month. 

Regularly Review Your Budget to Make Adjustments

Always remember that your numbers must always add up. The only way to ensure this happens is by regularly making necessary adjustments to prevent overspending. For instance, deciding to eat out a lot less might be a direct way to keep expenses within a budget. Another adjustment is to reduce the number of subscription service plans purchased, such as sticking to one music streaming platform instead of subscribing to several. Note that even modest savings can grow into a substantial amount when accumulated continuously.

Also, reviewing your budget may involve changing your budgeting strategy. While the 50/30/20 strategy might be easier for many to follow, your personal expenses and habits may fit the envelope strategy better.

Find Good Prices

Keeping to a strict budget sometimes requires hunting for the best price options for most products. Multiple stores may price the same product differently, as prices sometimes vary by location. Before doing any shopping, whether for essentials or otherwise, consider researching stores and prices. In addition, you can target sales events like Black Friday to take advantage of low prices on products you might not need immediately.

Another trick to finding good prices is simply making bulk purchases. Instead of buying individual products, consider bulk purchases to take advantage of pricing. Although this might require you to exceed the amount allocated for one month, you will more than make up for it the months after, as such purchases are mostly non-recurring.

Curb Impulse Spending

As much as you can, plan every expense. A good budget allows for emergency funds that cover unexpected expenses when they are important. This means that unplanned expenses should be reduced to a minimum. 

The urge to buy something unplanned can be quite strong, especially with online ads popping up on phone and computer screens every so often. However, consider employing a 24-hour rule that requires you to wait a whole day before making a non-essential purchase impulsively. In most cases, the urge will pass.

Another trick is to avoid saving credit card or wallet information on e-commerce websites or online platforms. If you already have any saved, consider deleting them all. Doing this makes purchases a lot less convenient and ultimately discourages spontaneous spending. 

Live Within Your Means

Do not be in a hurry to take a loan or access extra credit simply because you can. If you must borrow money, ensure that the funds are tied to critical needs and used strictly for these purposes. Also, make sure to understand all terms and conditions, such as loan duration and interest, before taking any loans.

Extra Tip: Building Multiple Income Streams

Unfortunately, reliance on a single source of income can be risky. Even with a stable job, the idea of a side hustle or a flexible freelancing career should be considered. An extra source of income may be safe investments in stable exchange-traded funds or individual stocks. Other options include real estate and cryptocurrencies. However, you should note that investments require extensive research and should be approached cautiously.

Conclusion

Plugging salary leaks requires a combination of discipline and proactive financial management. Anyone can implement the above tips to achieve savings and financial goals, as well as build long-term financial security such that temporary disruptions in income do not constitute financial emergencies.