After seeing where your money goes, it becomes more clear how and where you can dedicate your precious resources. This is a mental exercise as well as a financial one. But spending less than you earn is the ONLY way to ever accumulate wealth. If you consume every dollar that you produce then you have no reserves to invest and you remain on the very edge. Give yourself some time to develop new habits, you got this.
Spend a Sunday at the kitchen table (or computer) and spend some time dividing your dollars. Never leave out the first: 10% to you. I also believe in giving. 10% is the number recommended, but if that goal is unattainable then start with something. You can also volunteer your time. Learning to give is important to the Abundant Life. Divide up the rest into your hard costs (known expenses) and soft costs (variable from month to month expenses). Once your money is correctly allocated, you will experience stress relief.
If your dollars won’t stretch at the moment, you may have to buckle down and create more income to cover things for awhile until you can right your ship.
There are many ways to save/spend money, but all of them require you to become keenly aware of where and how the money leaves. Which is why it was important to record your spending habits before starting here. Don’t skip that exercise, it is very revealing.
Let me address the biggest budget busters and how to overcome them, starting at the top:
1). Housing: Rules of thumb: 15 year note, fixed rate, and payment is only 25% of your monthly income. Biggest investment most of us make, do it correctly.
2) Cars. Lots of money is lost here because this is a game that involves ego. Here is a smart way to buy cars that can also help you retire rich.
3) Convenience Purchases: This includes lunches, quick meals, drinks, coffee, cigarettes, vending machines and more. When looked at as whole, there is a lot of money that goes here, money that should be allocated to reducing debt or invested for your future. Create a plan to avoid most of these purchases, plan ahead.
4) Grocery Store: This is a BIG expense for most families. Go smart and prepared. Remember, more packaging and advertising a product has usually means the more expensive and unhealthy it is. Go for less packaging, less pre-packaged food, fewer ingredients. Buy closer to the source. (and off the lower shelf). I hit the edges and avoid the isles.
5) Clothing: Hello thrift stores. Clearance rack only for me. Buy off season, much cheaper. They are desperate to clear their racks.
If you have some good ideas for saving money and buying cheap, share them below?