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How to effectively split your paycheck

Dividing your salary is very important because there is only one income source, but multiple expenses. Among these, there are many fixed expenses while others are dynamic as well as some unexpected ones like in cases of emergencies. So to tackle this issue, it is very important to properly divide your salary so that not only you have channelized your expenses properly, but also end up with a significant amount of savings at the end of the month.

1. Note down all the fixed expenses

You will always have fixed expenses like utilities, bills, loan EMIs, etc. You are going to have to find a way out of all this and that is only possible by noting down all the expenses so that you that you will have a clear picture as to how much you actually have in hand to spend on other expenses.

2. Decide the amount of savings

You do want to end up with some considerable amount of savings for a rainy day and that is only possible if you set aside the savings amount before itself so that you do not count it into your available amount of expenses. This will allow you to save money as well as manage your expenses much more effectively.

3. Allot pocket money sensibly

Your kids will surely be asking you for pocket money, but always make sure to keep their pocket money dynamic. It is always preferable to give them pocket money at the end of the month when you are due for the next month’s salary. This way all the leftover amount you have after all the expenses of the month, you can give it as pocket money.

4. Only buy what you need

When you are on a tight budget or having a cash problem, it is always preferable to get only what you need and not what you want. This means you will have to sacrifice on the luxury a bit, but do not scrounge when it comes to necessity like groceries. The movie nights and date nights can wait.

5. Avoid using credit cards

Credit cards, though a good cashless option, are big trouble for those who are on a tight budget. You always happen to buy something that you do not really need just because you can with a credit card as you have to pay later, but the expenses pile up pretty quickly later and then you are unable to pay.

6. Be wary of unexpected expenses

There can always be unexpected expenses like doctor’s expenses, maybe a storm or hurricane can ruin your house. Or some broken piece of furniture needs fixing. So you also need to keep that in mind when dividing your salary.