Let's talk about personal finances. I'm going to try and keep this thread up, and we can all use it as financial advice to eachother.
For my first post I'll talk about the importance of understanding daily budgeting.
Many people lack the understanding of what a daily budget is, and how to prepare one. I stress the point of a daily budget, as budgeting at a monthly level usually means you find yourself six or seven days from your next paycheck with little to no cash. I like to use my rule of 3-C; Calculate, Consider, Condense. The first and most important aspect is calculating your daily intake/outake.
It's fairly simple to calculate when you're paid bi-monthly. However, many of us get paid bi-weekly. When this happens we must annualize the amount before budgeting. To do so you take XXXX * 26 periods / 365 days = daily take home. From here, you can multiply out per month. For example, a bi-weekly pay check with $2,000 take home, yields 142.46/day.
Once you get your daily take home, you can start playing around with your numbers. Let's take March for example. You know you have $142.46/day but this is before bills, loans, savings etc. You would multiply the $142.46 * 31 days = 4416.26. Let's say you have $1,000 for rent and another $1,500 used to pay loans and put money away for savings. You then take $4416.26 - $1000 - $1500 = $1916.26. Now we divide the days again to come at $1916.26/31days = 61.84. This amount is the total you can spend PER DAY without using outside sources to maintain (i.e. debt). Microcalculating this provides a much better picture of your financial stature. Before, I relied on the monthly budget, but then realized I was over-spending and extended my debt to support my daily spending as I average $20.00 over what I should have been spending.
The second C, consider, plays a large role in keeping in line with your budget. You should always be considering whether you need or want something, and if there's room in your daily budget to purchase. My rule of thumb now is not to purchase anything that extends outside your daily budget unless one of two conditions occurs: 1. You have leftover from a PRIOR days budget (notice I didn't say for FUTURE, as you never know what expenses may pop up). 2. You are purchasing an item with debt, that you can pay off, that provides continued future benefit. Afterall, you wouldn't blow your budget and go into debt for a steak ... there's no use after it and you'd still be paying for it ! By actively considering each item and your budget, you enable yourself to reduce overspending.
Lastly, condense your budget. In the example above, you are left with $61.84. But what happens if you need additional cash on tap? In addition to your savings, retirement, etc etc ... you should build a small emergency fund in your checking account. You can do this fairly quick by condensing leeway into your budget. Instead of having $61.84 daily, you can reduce your budget to $45.00 per day and grow your emergency fund. Condensing gives you leeway and in a somewhat psychosomatic way, allows your not to have a panic attack if you blow your budget by a few dollars.