Budget

Saving Money Starts Now

Saving Money Starts Now

Money Maroon

Saving money begins with first having at least one income stream. Second, saving money requires spending less than your income, not spending in excess and doing so consistently over time. Saving is the first step towards financial independence and while saving money is a simple concept, consistently saving over time is difficult for many.

Assess Your Current Financials

If you truly would like to begin saving money, it is important to know where you are financially. It is important to take stock of your financials right at this moment. It is time to know what your monthly expenses are and how much you are bringing in each month.  By making a list of your monthly income and monthly expenses, you get a clear picture of why you are getting in debt or not saving enough.

Determine How Much You Can Save

When it comes to saving money, the math will never work if your expense are higher than your income. Once you make a list of your monthly income and your monthly expenses, it is time to take a close look at your list of monthly expenses. Now ask yourself, what can be reduced or cut out? It may be: moving to a smaller home to reduce rent/mortgage, moving closer to work to reduce the cost of commuting, bringing your lunch to work, stop/reduce eating out, cut your cable or other subscription costs. Make your list, however, whatever the cost cutting measure may be, it is important to review your list of expenses and be honest with yourself. While it is great to say that you will cut or reduce your expenses, you must be able to actually implement your plan of reducing cost.  

Increase Your Income

Now, turn to the income side of your list. How can you increase your income? This increase need not be immediate, but must be doable. For example, you can request a raise, change jobs, invest in your education and return to school/learn a skill to get a better position or research a side hustle that may provided additional income? The goal is to increase your income such that your income is higher than your expenses.

Begin Saving Money

Once you are able to get your income higher than your expenses, you have done the hard work and you are 90% there. But you must take the next critical step and perform the act of saving money. Now that your income is higher than your expenses, you must save that money. Many fall into the trap of spending their disposable income each month. Do not fall into this trap, remember, your goal is not to simply reduce your expenses and increasing your income. Your goal is to save money. So save your money.

There are a number of tools available that facilitates saving money. For example you can automate your savings by automatically transferring money from your pay to a savings account or you may save in a high yield savings account that provides higher interest rates than the typical brick and mortar banks. Research the options available to maximize and grow your savings. Further, to consistently save, while it is not required, a budget may provide a financial guide.

Saving Money And Your Future

Now that you are saving money, do look towards the future and your financial health. Look to paying off debts, investing, and contributing to your retirement. Saving is only the first step on the path to growing financially and financial independence.

Conclusion

Saving money begins with first having at least one income stream. Second, saving money requires spending less than your income, not spending in excess and doing so consistently over time. Saving is the first step towards financial independence and while saving money is a simple concept, consistently saving money over time is difficult for many. Take your first steps to financial independence today.

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Accounting

You Do Not Need To Make A Budget

Money Maroon

When we hear the word “budget,” most immediately think of a rigid system of not only an itemized estimate of income and expenses, but also writing down and tracking each transaction as they are made. As you can imagine, implementation of these ideas could be very burdensome for many. The thought of itemization and keeping track of every expenditure contributes to why so many individuals do not take the first step to know their financial position. I am here to tell you that while having a detailed budget is recommended, it is not needed. Yes, you do not need to make a budget. Your first step to financial independence is getting a general understanding of your revenue and expenses.

What Is A Budget?

A budget is a financial plan for a defined period of time. Typically, a budget will include an itemized estimate of revenue and expenses over a period of time. For example a week, month, a year or a period of time in between in the future. The aim of any budget is to give a financial projection for a period of time in the future. It is a financial roadmap.

Following A Budget

The hard work of a budget is not only the act of sitting down and tediously making a detailed budget. The hard work of a budget comes following drafting and finalizing the budget. Hard work is the act of sticking with the budget. The hard work is tracking your spending, and ensuring that you are staying within the confines of your budget. Essentially, a budget is your guardrails and your aim is to stay within these guardrails.

The Problem

The issue that is commonly seen with budgets is the fact that many do not get started. If you are not getting started on making a budget, there is no hope of sticking to a budget. With regard to a rigid budget, many find itemizing over a period of time very cumbersome. Further, tracking spending becomes burdensome for many. Because most do not sit down and draft a budget, they do not get a true picture of their financial situation. They  remain clueless about their total revenue and expenditure. They are unable to reap the benefits of knowing what they are spending on and how to stop if necessary.

The Solution – You Do Not Need To Make A Budget

You do not need a formal rigid budget. Yes, you do not need to make a budget. Generally, what is needed is a general understanding of what you are taking in and what you are spending over a period of time. This is the first step. A deep itemized dive can come later.

Many who do not have a set salary have no idea how much money they are making per month. I am talking to those who are hourly workers, get tips, or commissions. Further, those with salaries may know what they make each year in total, but how much do you take home each pay period? Surprisingly, most do not know this total. If you do not know what you are taking home, how can you consistently save, invest and build wealth?

The Solution – Get A General Overview

Sit down and take 5 minutes to consider how much you are taking in each month. Look at one or two pay stubs and use a calculator if needed. Think of your average commission or tip per pay period. Only 5 minutes required. 

Once you have an idea of how much you are taking in on average, consider what you are spending.This will require another 5 minutes. Note your recurring expenses (mortgage/rent, car payment/maintenance, cable/internet, electricity) + what you spend each workday multiply by 20 (coffee, transportation, lunch) + weekend expenses multiply by 4. This will give you an average of your expenditure per month. That is it folks. This 10 minute calculation will give you a general understanding of what you are taking in and what you are spending monthly. Is your spending greater than your income? Do you have money left to save or invest? Can you pay yourself first?

Now, with these numbers, you are ahead of the game. It is clear on average what you spend and what you are bringing in each month. You now have the power to take control. You can decide to cut back on spending, earn more, decide if you need to sit down and make a formal detailed budget, or if you want to track spending to further optimize.  

By performing this exercise, you are able to obtain a high level view of your financial situation. From this vantage point, your next step may be to make a budget, to track your spending, and/or implement a financial plan. This exercise can serve as the basis for your next step.

The Benefit

At times, when we give general advice we introduce rigid concepts, for example, budgeting. It is important to know what to do, but it is more important to start doing. One of the first step on the journey to financial independence is getting a general overview of your financial health. A simple review of your income and spending will provide this general overview. From this jump-off point, you can take the next steps on your journey.

While You Do not Need To Make A Budget, Having One Can Be Beneficial

Budgets are great because they serve as a guide. Even if you go over, a budget gives you an idea of what you are over spending on. Budgets give you that answers to the question, why are you in debt? Further, a good budget also have the potentially to provide a roadmap out of debt. However, when you are beginning your journey to financial independence, you do not need a budget.

Conclusion

When we hear the word “budget,” most immediately think of a rigid system of not only an itemized estimate of income and expenses, but also writing down and tracking each transaction as they are made. As you can imagine, implementation of these ideas could be very burdensome for many. The thought of itemization and keeping track of every expenditure contributes to why so many individuals do not take the first steps of knowing their financial position. I am here to tell you that while having a detailed budget is recommended, it is not needed. Yes, you do not need to make a budget. Your first step to financial independence is getting a general understanding of your revenue and expenses.

Follow me on Twitter @JoToFI_com

Follow me on Instagram @JoToFI_com

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