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 in financial debts and becoming too dependent on others.
So if you struggle to save or gain a good command over your finances, here are 4 simple steps to follow in order to start budgeting and save more money every month.
Step 1: Set your financial goals
First things first, in order to gain more control over your finances, it’s very important to set specific goals. One of the most common reasons why our finances spin out of control is due to lack of vision. Why should you start saving money, if you don’t even know what you’re saving for?
There are different ways you can set your financial goals. Some set financial goals for a year. However, if easier, you can set financial goals for each month. For example, make a list of all your primary expenses:
- Bills (electric, water, broadband, phone, gym, car)
- Health insurance
- Tithe (to support your local church) / Charity funding
- Savings 10 – 20%
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 on what you’re actually saving for, this will keep you determined throughout the process.
Step 2: Work out your priorities
Looking back at the primary list above, 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.
Too many people spend money they don’t have, to buy things they don’t want, to impress people they don’t like ~ Will Rogers
Step 3: 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). You really don’t need new clothes or the latest electronic gadgets every month. This does not mean you can’t buy something nice for yourself once in a while. However, try not to overdo this.
Step 4: 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.