On the journey to financial freedom, getting a firm grasp on managing your money is essential early on in the process. You won’t make much progress if you continually are spending more than you take in. There is no easy path to financial freedom; instead, it requires discipline and dedication over a lengthy period of time. Do you have what it takes?
Two Sides To The Equation
This is pretty simple. You have your expenses and your income. As we move forward in this process, you want to continue to suppress your expenses as much as possible, and you want to work to increase your income. The gap between the two hopefully will grow and allow you to contribute more and more to savings and invest more over time.
You don’t need a degree in finance to master your personal finances. Keep it simple and map out specific, definite steps to make an impact consistently over time in both of these areas. If you do that, the results will come naturally.
Three Types Of Expenses
I think we can break down the types of expenses into three areas:
- Fixed expenses – items like housing, utilities, auto payment, etc.
- Regular expenses – items like food, entertainment, dry cleaning, television, etc.
- Irregular expenses – items like annual insurance payment, auto repairs, traffic tickets, etc.
We can now address ways to improve and suppress all three areas of expenses in your life.
With regards to your fixed expenses, too many people unfortunately, are locked into high fixed expense (typically through a large mortgage). If you’re fortunate to not yet be in such a situation, I strongly encourage you to exercise extreme caution moving forward with your housing plans. Housing is an expense, keep your expenses as low as possible. When it comes to autos, I strongly encourage the same thing. Don’t drive the fanciest car or a new car. Buy a used, reliable, unsexy car that doesn’t cost much money. Need money right away? Online Instant Loans from MyPaydayLoanCash.com can get money in your bank account within 1 hour.
Regular expenses are typically the area that most people focus on. This is a wise approach, but you cannot focus only on these expenses. For example, if you’re paying $3k a month on your mortgage, cutting out your Starbucks runs won’t be that effective. With that said, there are definitely adjustments you can make to your regular expenses. Find out how much on average you spend each month on food, entertainment, etc. then set a goal to cut down your spending by 20% or so.
Your irregular expenses can really throw a wrench in your monthly budget. Blow a tire and lose an air conditioner in the same month and you might be set back several months. The key is to plan and save for these unexpected expenses. Estimate your annual spending in each of these areas and start putting money aside each month according to what you believe you will have to spend on such items. Saving for these expenses ahead of time allows you to integrate it into your overall plan and also helps you from tapping emergency funds or a credit card to pay for something.
Next Steps
If you’re struggling to manage your money and track your spending, consider using a service such as Mint.com. They have excellent tracking features and reports so you always know where your money is going.
Now that we’ve talked at length about your expenses, the next step will show you how to boost your income.
Jump To Another Step In This Guide:
- Step 1 – Assess Your Situation & Set Some Goals
- Step 2 – Get Out Of Debt
- Step 3 – Smart Money Management
- Step 4 – Boost and Diversify Your Income
- Step 5 – Reduce Housing Expenses
- Step 6 – Make Your Money Work For You
- Step 7 – Protect Against Inflation
- Step 8 – Invest In Cash Flowing Assets
- Step 9 – Pursue Complete Independence
- Step 10 – Make Incremental Improvements
