If you are earning money then you should be putting some of that money aside for an emergency, retirement, a vacation or even something you desire to get. What I have always lived by, is to pay myself first, then my bills and everything else after that. Trust me, I know it can be hard to save money, especially when you have very little and are living pay-check to pay-check. However, if you really track where your money is going, most of the time you can always find something that you bought but didn’t really need. That is where you should focus your effort, reducing unnecessary expenditures.
First rule of thumb, pay yourself first. If saving for retirement and your employer has a matching retirement contribution, where they will match a certain percent of money that you invest in a retirement plan, then you should be putting that much aside for retirement. Otherwise you are throwing away free money. For example, if your employer will match up to 4 percent, then you should be contributing 4 percent of your pay towards retirement. So if you are making 40,000 dollars a year, you will be saving 1,600 dollars annually towards retirement and your employer will add another 1,600 dollars annually towards your retirement. Yes, 1,600 dollars does not seem like much, but if you have a good plan and contribute consistently over the years it will begin to add up. In 20, 30 or 40 years you will be surprised at how much you have saved towards retirement. If you want to make your contribution grow, every time you get a pay raise, increase your retirement contribution. For example, if you get a 2 percent pay raise then increase your contribution by .05 to 1 percent and if you do this for every pay raise, your retirement contribution will continue to grow.
Second part of the first rule of thumb, is to save for an emergency, a vacation or even something you desire to get. Pay your self first. Every time you get paid you should pay yourself first before anything else. Take the time to track all your expenses and know where your money is going. Once you know exactly what it will cost you to live on (getting by with what you need, not want) you will know how much you can save. So even if it’s only 20 dollars a pay period, you should put that aside before you pay your bills and living expenses. The more you can put aside the more you will have when you need it. Keep in mind, that if you choose to take what you have saved and go on vacation or buy something you desire, try not to spend more than 40 to 60 percent of what you have saved. This way you are not starting all over from scratch. Also, if you ever get laid off you will have money to help you out until you find employment.
Second rule of thumb, is to pay your bills on time. In today’s society a credit score means everything from getting a credit card to buying a home, heck your credit score is even looked at when renting a place to live or getting car insurance. Keep paying your bills on time avoid being late on payments and keep your debt under control and your credit should be just fine.
Last rule of thumb, use what you have left to live off. If you are living pay-check to pay-check, then try to spread out what you have remaining so that it last you through the pay period. One thing I always did was to take the money I had left after paying myself and my bills, in cash. I would then divide the cash into weekly amounts and that is how much I would have to spend each week until my next pay check. For me it was easy to manage because I could visibly see how much cash I had left after each purchase. For example, if I got paid bi-weekly and had 350 dollars left after paying myself and bills then I would give myself (in cash) 175 dollars each week. I would then buy what I “needed” to get through the week (such as food and gas) and what was left (if any) I could use for something I wanted (such as entertainment, clothing, or whatever) or hold on to it and the following week add it to my 175, and so on. The most important thing here is to know where your money is going, get a handle on it and control the unnecessary spending.
Just my thoughts.