Did you know that only 58% of Americans track their spending against a monthly budget? To achieve financial freedom, you must create an intentional spending plan and stick with it. Though it may feel overwhelming, a spending plan is necessary in order to meet your short- and long term- financial goals. Imagine having the money to live comfortably, take a dream vacation, pay for your child’s education and maintain your lifestyle during retirement. Creating, and adhering, to your spending plan (or budget) will help you achieve those goals.
Here are some tips for creating your budget, and saving money:
1. List all of your fixed expenses, such as utilities, groceries, and debt payments.
2. List all of your irregular expenses. These expenses are due throughout the year, including taxes, car maintenance, and vacations.
3. Every other expense is discretionary spending. This includes shopping and your daily gourmet coffee run.
4. A, B, C your expenses. A’s are needs. B’s are needs you can be more efficient with, like utilities or groceries. C’s are wants.
5. Total your expenses and compare them to your net income. If your expenses total more than your income, then it’s time to reassess your spending habits and make cuts from your B’s and C’s.
Save: Paying Yourself First
– Make it automatic. Sign up for your bank’s automatic transfer program and move a percentage of your paycheck to your savings account each payday.
– Ask for discounts. For example, ask your insurance company about discounts that you may qualify for, which can lead to savings on your premium.
– Think before you buy. To resist impulse buys, wait 24 hours to buy an item. It may turn out that you do not need it after all.
And remember, if you have to finance it, you can’t afford it. The only exceptions to this rule are homes and cars (and an education). If you can’t pay for it on the spot, then you should wait to buy it until you have saved the cash.
Follow these tips and you’ll work your way to financial freedom!