Nothing keeps us more awake at night than concerns regarding money. Let’s face it, in today’s world wherein the necessities are no longer picked from trees, hunted in forests or built ourselves, it has become a must to gain access to some cold, hard currency. Don’t forget to factor in the creature comforts we enjoy that satisfy both our needs and our wants. Yes, today’s life means finding the right amount to pay for housing, food, clothing, utilities which are the 3 basic human needs. We also need to fund the things that help us make the money to fund everything else; sometimes these may be our mobile phones, Internet, fuel or transportation costs, oh and don’t forget servicing that debt we owe, for our car, for college, for that cool vacation we just had, and these are just among the few we juggle every month.
This may all seem mind-boggling and very overwhelming to us. Many argue that society has caught itself up on a web of complication and that the expenses we attribute to ourselves nowadays are complications and distractions. This kind of mindset has fueled people to go off the grid and retreat from society. While that’s all well and nice, unless you’re great at hunting and farming and you’re capable of footing the initial major expense of setting up your independently run homestead, this isn’t something we are going to start off with.
The key to making that budget stretch out is understanding what we have and how to make it work for us. Our budget is dependent of course on the income we receive from our job or from any investments that give us a short-term return. Before we make things even more complicated let’s assume our primary income is from our work paychecks. Here are some basic helpful tips to stretch our money and begin the path to the concept of financial fortune. As this series develops we’ll look into each one in-depth and help you identify how to make them work better for your personal finance.
Pay Yourself First
Paying yourself first means setting aside savings or investments before you spend it on anything else. Doing it this way versus the traditional way of saving after you’ve completed your expenses is more effective because it artificially limits your consumable income while guaranteeing savings. Putting it simply, it’s hard to overspend on money that isn’t available to overspend on in the first place. Paying yourself first and spending next will help you build that savings nest in no time at all.
Determine Your Absolute Basic Expenses
There are certain expenses that just cannot be missed month over month. It is essential to map which of these are so you know what to save for as a contingency. Identifying your absolute expenses also allows you to already set aside what is needed from your monthly income, which you already set aside savings for. Review these expenses well, a good way to test if they are necessary is to visualize to yourself what would happen if you didn’t pay for that and what you’d lose from it. If you are capable of eating, taking shelter or capable of continuing your work effectively without this expense, then it’s not an absolute necessity expense.
Create a Budget for the Month
Putting together a plan and committing yourself to fulfilling that plan is essential in improving your personal financial situation. Now that you’ve determined what your absolute expenses are, if there is some money left, pencil in the other things into this. Carry a copy of this with you at all times, whether on a small sheet of paper or on your smartphone, this has to be your game plan day in and day out.
Document Your Expenses
There’s no excuse not being able to document your expenses. Bring a small notepad with you, use your smartphone or put it into your computer or over the Internet. The key is being able to take note of your expenses. I would highly suggest just jotting down your expenses on the first month and not making a conscious effort to save money just yet. This allows a baseline to be set and make you realize what kinds of stuff, especially the crazy, unnecessary ones you are spending on.
Review Your Expenses and Next Month’s Budget
No use documenting those expenses if you’re not going to review and analyze them right? Use a simple spreadsheet so you can have an overview and classify how your month went. Then compare this against what you have set up as a budget. This discipline allows you to identify areas to improve on and creates a sense of achievement when you hit your budget accordingly.
Don’t be too hard on yourself with your budget. Allot a few things that relate to your particular joys in life. Pencil in some money for movies or dinner at a fancy restaurant or a short trip to a nearby theme park. Remember, burning yourself out is always a surefire way to fail at something. Another key factor to consider is creating a scorecard, which has hitting the budget and amount saved as your goals. Every time you accomplish this, make that a basis for that reward. This creates an outlook where you actually are excited to review and create your budget and at the same time gives you a sense of success that motivates you to continue on.
There are more ways to secure your financial future, several ways to ensure a more comfortable life in the future and stretch your income as well as protection from any unforeseen events coming your way. In future articles we’ll thresh out each of these steps and go into a more in-depth look to help you make your future a step closer.