Whether you’re 20-something and straight out of college or in the grind-out years of making extra payments on your mortgage, sticking to a budget and committing to personal finance goals is crucial for financial prepping. While it’s easy to say, ‘I am sticking to my budget this time,’ it becomes doubly important to make plan action. While everyone knows some of the basics of sound personal finance (no big unnecessary big purchases and stay-in to cook dinner instead of going out) there are some less obvious tips that can make a world of difference to your budget. Let’s discuss this with greater depth.
Companies keep track of budgets through comprehensive documents and similar full-fledged financial tracking programs. Imagine if companies didn’t keep a physical (or digital) copy to help plan out monthly expenses. At the end of the month, the company would be frantically scrambling around wondering where all that company cash went right as the office power bill arrived. Use this same principle on a smaller scale when it comes to your personal finance planning. The point here is to make a record in a data spreadsheet. Don’t have a computer or way to digitally record your budget? Write it down on a piece of paper. Dedicate a line or space for each expense you plan to have and record exactly how much you plan to spend on that one item. Use this plan when comparing your actual end-of-the-month expenses.
It can be a slippery slope when it comes to spending, but it can go the same way for not spending. Set a goal each month and see if you can spend less than that the next month.
However, don’t become a cheap person while on the path to being a frugal. This means penny pinching every decision you make. Especially when you are out with friends, family or other associates being cheap can alienate you from groups. Pay your part and don’t try to make others foot the bill for you, or you’ll stop getting invited to events.
Set records in terms of your personal allowances. This is a critical concept of financial prepping for the long-term – improve against yourself. If you went out for dinner 6 times a month last month, try to cut that to four or go extreme and cut it to a bi-monthly end-of-the-week reward. Set personal bests and see how much you can cut without cutting necessities (or relationships).
This isn’t going to be a drawn-out declaration to saving and investing (both are positive options, of course). This is a mindset you should have when making spending purchases. Choices such as Starbucks in the mornings before work, going out on lunch breaks, weekend trips to Las Vegas, and massage subscriptions are all short-term satisfaction purchases. Instead, make more long-term purchases and durable goods.
An example of this could be a new/used mountain bike (I’m into trailing). While likely expensive, a mountain bike will last several years if taken care of properly. Instead of renting a cabin for a week to go hiking, I bought a mountain bike to visit some of the local backcountry. Every couple of weekends I go out and do some riding. This provides me the same satisfaction as going hiking but over the long term my cost is much cheaper than renting a cabin and going hiking for vacation every year.
This is just one example of this long-term financial prepping mindset. See if you can think of other creative ways to substitute long-term satisfaction instead of short-term. Contact us if you have any brainchildren.
When you’re in debt, even crawling up a mountain will get you somewhere. Budgeting, setting personal records, and substituting short term satisfaction for long term benefit can all make up a framework that will help you save money in the end.
The thing that matters most is getting into a mindset. It may be tough to cut your daily latte from your life at first, but over time not having that latte will be made habit and you will not desire it as much. Buy a can of your favorite coffee and have it last a couple months and brew your own coffee each morning. You’ll be so relieved to find out how much you’ll save on coffee and other like-purchases.
When you finally do reach the summit of that mountain and can finally say you are debt-free is something not many people experience. When you do, you’ll remove a monkey off your back that effects much more than just your bank account. It’ll relieve personal stress, improve your happiness, and provide other untold positives.
Now get out there and climb that mountain!
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