Learning how to budget and save money is a great way to become financially secure. It’s the key to financial freedom and wealth… literally. It’s the ultimate way to prevent yourself from ending up in debt and becoming too dependent on others.
If you’re struggling to save or gain a good command over your finances, here are 4 simple steps you need to follow to help save more money every month, this year.
Step 1: Set your financial goals
First things first. In order to gain more control over your finances, it’s important to set specific financial goals. One of the most common reasons why our finances spin out of control is because we often don’t have a financial vision.
Why should you start saving money, if you don’t even know what you’re saving for?
There are different ways to set your goals. Some set financial goals for a whole year. However, if easier, you can break your financial goals for the year into months. This will give you a good overview of the amount of money you can spend and should be saving every month.
Step 2: Make a list of your expenses
In order to budget and save more money, you need to start with a list of all your primary expenses. The list could look something like this…
- Bills (electric, water, broadband, phone, gym, car)
- Health insurance
- Tithe (to support your local church) / Charity funding
Include a specific percentage of your income that you’re willing to save each month. To start, this could be 10 – 20% of your income. So if you’re earning £2000 a month, you can set a goal to save £200 – £400 a month. In other words, have a clear vision of what you’re actually saving for, this will keep you determined throughout the process.
Step 3: Work out your priorities
Review your primary list of expenses. When subtracting your primary expenses from your monthly earnings, do you have a reasonable amount left for the rest of the month? If not, take a good look at your primary expenses and work out your priorities. What are the things you can do without?
For example, you could do without a gym subscription and start running or doing outdoor workout activities. Also, if you’re driving a luxury car with too many monthly expenses attached to it, you might consider getting a regular car that will just get you from point A to point B.
Step 4: Cut excessive spending habits
In order to budget and save more money, you have to be willing to cut excessive spending habits. Honestly, you really can’t afford the be spending more than you actually earn.
Will Rogers said it best when he said: “Too many people spend money they don’t have, to buy things they don’t want, to impress people they don’t like”.
Never try to live above your means just to impress others. The only person you end up hurting, in the long run, is yourself (and your family). Do you really need new clothes or the latest gadgets every single month?
This doesn’t mean you can’t buy something nice for yourself once in a while. However, try not to overdo this.
Step 5: Look for alternative choices
So now that you’ve set your goals, worked out your priorities and stopped spending money on things you don’t need – It’s time to explore alternative choices. For example, instead of eating out every Friday evening, try to eat out once a month. You could also try to recreate your favourite food and dishes at home to help you save more money.
What are some of your go-to tips when it comes to budgeting and saving money?