Want to know the secret to being financially independent?
All you need to do is spend less than you earn. On the surface, that sounds simple enough. You keep an eye on the amount of money that you make each month and ensure that you keep your spending to a minimum. However, when you start adding up the costs of all the essentials, like food, bills, and more, the cash you earn quickly disappears.
The crucial expenses that we all have to think about each month take up so much of our money, that most Americans say that they wouldn’t have the cash to deal with an emergency expense costing more than $400.
Sound familiar? The good news is that you can eliminate some of this spending stress just by building a better money plan. Here’s how you get started.
1. Know Your Goal
We all have goals in life. The chances are that your ambitions don’t revolve around, saving every penny that you earn away for a rainy day. Instead, you likely want to do things like buy a house or go on vacation with the family. With that in mind, you should always make decisions about how to spend and save while thinking about your goals.
For instance, if you aim to put a deposit on a house in the next five years, then you need to make sure that you’re earning as much money as you can for that new home. Although taking out a loan via a site like Readies.co.uk now means that you can borrow money to buy a car and get to a job that pays more, then it does make sense. If you’re earning more from your career, you’ll pay off your loan, and get to your financial goal a lot faster too.
Thinking about your goals as you make your spending decisions ensures that you’re not just saying “no” to costs because you think that’s the right thing to do.
2. Take More Steps to Track your Spending
The most significant stresses that we face when it comes to saving and managing money often comes when we get a surprise. When you check your bank account statement online and realize that you have a lot less cash than you thought – that can be a huge blow. One of the best ways to avoid this problem is to make sure that there are no little surprises in your cash flow.
Rather than waiting until the end of the month to check that you have enough cash left in your account for things like savings, put steps in place to ensure that you’re always tracking what’s going on with your money. This could mean merely setting an alarm on your phone’s calendar that reminds you to check your bank balance at the end of each week.
You could also think about downloading an app for your smartphone that helps to track all your purchases. There are plenty of apps that can offer this service today, and they can even give you advice on how to reduce your spending in certain areas.
3. Stick to the Basics
Finally, a lot of people who struggle with budgeting have a hard time because they give themselves too much of a challenging strategy to stick to. In a world full of technology, it’s easy to tell yourself that you should try the latest app-focused budgeting strategy. However, you don’t need to do this if you don’t want to. You can stick to a very basic strategy instead.
For instance, a three category budget will be enough to work for most people. You don’t’ need to track every dime with this strategy. Instead, you simply make sure that you’re tracking the most common expenses in your life, like entertainment, essentials, and food. You can pick the three categories that you’d like to bring under control the most – such as eating out or buying gadgets, then focus on improving your spending habits in just those areas.
Tracking the way that you spend in your most significant problem areas can be a lot easier than trying to deal with your entire financial strategy at once. You could even just start with focusing on a single category and move to a new one once you feel that you’re getting your most problematic area of spending under control. Do what works for you. There’s no one right way to budget.