Managing Income in Personal Finances
1. Determine Every Revenue Source Keep track of all your sources of income: Wages or salary (net after taxes) Earnings from side projects or freelancing Income from investments (rental income, dividends) Commissions or bonuses Pensions or government assistance ✅ Advice: Build your plan on your net (take-home) income.
2. Sort Your Allocation of Income Make use of a clever breakdown, such as the 50/30/20 Rule, or modify it to fit your need. Percentage by Category Essentials of Purpose (Needs) 50% of rent, utilities, food, insurance, and transportation Financial Objectives 20% for debt repayment, investments, and savings Lifestyle (Desires) 30% travel, dining, entertainment, and retail 💡 Depending on your objectives, you can adjust the percentages (e.g., 60/20/20 or 40/40/20).
3. Wherever possible, automate Contributions can be made directly to expenditure, investment, and savings accounts. To prevent late fees, schedule your loan, utility, and rent payments. Make use of apps or programs for budgeting such as Pocket Guard, YNAB, or Mint.
4. Make saving money your first priority (“Pay Yourself First”). Prior to making any additional purchases, automatically deposit a portion of your salary into: Emergency savings Long-term financial savings Fund for retirement
5. Establish Income-Based Objectives Set aside X% of your monthly income. Invest a set amount each month, such as 10%. Keep your discretionary expenditure to a percentage of your income.
6. Track and Modify Regularly Examine your monthly income and expenses. As your income increases or decreases, modify your allocations. Make advance plans for sporadic income (freelance work, bonuses).
7. If relevant, get ready for fluctuating income. If your earnings fluctuate: Use your lowest average month as the basis for your budget. Save extra throughout the months with high incomes. Create a lean buffer fund.
Author: Mohamed Yasin
