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Know how to divide your salary correctly is the first step towards financial organization. Finances need to be in order so that people can control their budgets, divide up their spending and make better use of their money. Check them out below. 

How to divide your salary correctly

Personal finance is about organizing your financial life. Although most people think the procedure is complicated, it is simple. But in order to control your budget, it's essential to be focused. 

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When consumers are in control of their finances, they can divide up their spending in the best possible way, making the most of their money. In order to achieve this stability, there are strategies for how to divide your salary correctly that can help. 

The first step to dividing your salary is to understand how important it is. When pay is divided into groups, you can organize all your expenses, which will help you save and plan financially. 

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Why split the salary 

Before discovering methods for dividing your salary correctly, you need to understand the importance of this practice in your life. Financial organization opens many doors for consumers, including financial stability. 

Dividing your budget properly and saving part of your income is difficult at first, but practice makes perfect. And wanting to achieve your financial goals is the first step towards a healthy financial life. 

Before anything else, people need to understand the importance of creating a financial plan. This process is fundamental to figuring out how money enters and leaves your account. 

With this information in hand, consumers can avoid unnecessary spending or delays in paying off debts. These are two really important characteristics for people who want to improve their financial situation. 

What are the best ways to divide your salary? 

Once you've created your financial plan, the next step is to learn how to divide your salary correctly. 

Nowadays, there are several simple and practical methods for organizing monthly income, such as the envelope method, 50-30-20 and 70-30. Although they have the same objective, these techniques differ in some respects. 

However, one thing they all have in common is the need for discipline and focus in order to achieve their financial goals. Anyway, if you want to organize your finances, get to know the methods: 

Envelope method

Most people who want to organize their financial lives apply the Envelope Method to their lives. This procedure is more intuitive and simpler than the others, which makes it easier to carry out. 

In general terms, consumers have an envelope for each category of expenditure. That is, one for supermarket expenses, another for water and electricity bills, and so on. That way, you only have to put in a certain amount of money to spend on that during the month. 

As with the other methods of dividing salaries, the first step is to create a financial spreadsheet. This way, consumers understand the amount of money that goes in and out of each category and can organize and divide their money. 

50-30-20 method

The 50-30-20 Method is perhaps the most popular among people who want to organize their financial lives. Created by American Elizabeth Warren, this method was born with the aim of improving money spending. 

By applying this method to their lives, in addition to organizing their spending, consumers are able to save money. In theory, the procedure consists of dividing net monthly income into categories, such as:

  • Fixed bills: 50% of your net income should be allocated to fixed living expenses, such as electricity, water, internet, transportation, food, etc. According to the method, essential expenses cannot exceed 50% of your salary; 
  • Variable Accounts: Another 30% of your salary goes towards variable accounts, such as leisure, streaming subscriptions, festivals, soccer matches and so on. In short, everything you consume, but which is considered superfluous in your life; 
  • Investments: Last but not least, 20% should be used to create an emergency reserve. When you have a good amount accumulated and the reserve available, consider investing in market products, such as Fixed Income. 

Although the method is organized and works in practice, people need to consider the challenges and their financial reality when starting it. That way, you can divide up your spending according to your needs. 

Method 70-30

Last but not least, the 70-30 Method is another recommendation for those who want to divide their salary correctly. Like the previous method, it also divides net monthly income into percentages. 

However, there are differences between the methods, this one is divided into just two parts. Also, when choosing this model for your financial organization, consumers will follow the division:

  • 70% of the net salary goes towards the month's expenses, such as electricity, water, internet, including leisure-related bills;
  • 30% of the salary goes towards some investment, as long as it's aimed at increasing capital. 

Most people believe that this method is simpler than the previous one, but it still requires focus and discipline. It also requires a lot of attention and organization, especially so that fixed costs are not confused. 

How to increase your income

Now that you know how to divide your salary correctly, it's time to find out how to increase your income. This is because increasing wealth is important for anyone, regardless of their financial goals. 

Nowadays, savings are not the most suitable investment, as the yield is not what it used to be. There are options that are just as safe, but with better returns, such as fixed-income securities. 

If you're looking for profitability, you should consider investing in other products. In addition to fixed income, you can invest in cryptocurrencies. However, unlike the first option, digital currencies are riskier investments. 

In short, before you start investing in any product, it's essential to understand your investor profile. That way, investors understand the risks of each investment and don't throw money away.

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