We are all searching for more freedom in our lives – whether it is freedom to make our own decisions, live life on our own terms or to be financially liberated from debt and financial anxiety.
The secret to obtaining that financial freedom comes down to a word that tends to have a terrible reputation – BUDGETING. This new year, instead of thinking of budgeting as restrictive and restraining, embrace it as one of the best means to obtain liberation! Use these budgeting tips to help you track your spending and make informed decisions about your money that are full of purpose and aligned with your goals of financial and life freedom!
It’s not about saying “no”… It’s about saying “yes!”
Budgeting is not supposed to feel like something you must do or should do to be an “adult.” It’s supposed to be a way to help you focus on the things that matter most to you. So instead of doing it because you have to, do it because you want to. Set a specific goal that is meaningful to you like being debt free, having savings to help with emergencies, going on a vacation, or buying your first home. If you do this, you’ll have a reason to say “no” to a more-than N50,000 shopping spree and saying “yes” to that goal you really want to achieve!
Get organised and pick your favourite way to track expenses
First, list out all your expenses. You can pull out your bank and credit card (if you have one) statements to review your spending and do it the old school way using pen and paper or use spreadsheets or an app – whichever you prefer. Then pick your favourite way to continue tracking expenses. Whether it’s a simple spreadsheet or a budgeting app. Use the system that works best for you so there will be a higher likelihood that you’ll stick with it.
Consider the 50-30-20 method to budgeting
This method of budgeting provides you with guardrails for your spending. The great thing about it is that it can be customised for your lifestyle and goal expenses. The base line split is:
- 50% of take-home income should go toward essential living expenses such as housing, groceries, utilities, etc.
- 30% is set aside for discretionary expenses like entertainment, and shopping while
- 20% is for savings and paying down debt.
You can always take from other buckets to help save more or speed up your debt payoff strategy.
Find easy ways to save and if you are in a cashflow bind, go for the most bang for your money
There are plenty of ways to reign in spending without drastically changing your lifestyle. Once a year, review your recurring expenses and/or negotiate for things like your wireless (WiFi) bill, cable, insurances etc. Also be sure to review your subscriptions since they have a sneaky way of creeping into your expenses!
With the rest of your expenses, highlight the items that are worth saying “no” to so that you can say “yes” to getting to the goals that matter most to you.
If you are in a tight cashflow crunch, consider items that will make a larger impact. Perhaps go from two cars to one and consider renting a lower cost apartment or moving to a less expensive location. Moves like these can unlock a lot of money per month. And they don’t have to be permanent – just long enough to get you back on track!
Create separate accounts and automate
Creating separate accounts can make automating your spending and savings so much easier. Start with three accounts:
- 1st – essential expenses
- 2nd – variable expenses
- 3rd – emergency savings.
Then set as much as you can on automatic and watch your debts dwindle and savings grow!
The time is now
Don’t procrastinate. These tips should help you say “yes” to your goals and dreams and allow you to start crafting the future you want now.
Cheers to a happy, healthy, and prosperous New Year!
partly culled from Forbes.com