Having a pre-set plan on how you are going to spend your money for the next 30 days for many seems as too much effort. Trust me it will have a positive effect on your whole attitude towards your finances. Making a budget was a task I put aside for quite some time. One day I just sat down and did it. What I found out in the next months was really suprising.
Making your personal budget will make you think on where you spend your money.
Once you start seeing the numbers that you would spend for some extra accessories, joining almost every social activity or buying that thing that you wanted but will only use once you realize that there are better channels to redirect the money you’ve earned.
Yes, there are some costs that are fixed or really beneficial for you. We are not talking about them. When I first made my budget I realized that I spend close to 40% for food & going out. Of course the food expenses I can’t cut but I asked myself if I really need to be having drinks in a bar four to five days a week. Well I did not stop having them but instead I started inviting friends over at my place which lowered my expenses by 20%.
Read more about practical budgeting tips from Dave Ramsey’s article: 15 Practical Budgeting Tips
Redirect the money you earn so they can start working for you.
Easier said than done. First step for everyone is to save some cash or how my grandmother used to say “white money for dark days”. But once you start making a budget you will be able to set a side some for investing. What financial advisors recommend is to have 10% of your monthly income saved or invested.
Investing some of the money you earn will bring you extra income.
This is the sweet spot you want to find yourself at. Imagine saving 1000$ and investing them with 8% return. With a bit of patience and you’ve got extra 80$ in no time. Might seem small but think about it, you did not have to do any extra work for them. Feels good right?
Combine that with the discipline of really thinking about making certain expenses that are not needed and you find yourself transformed. On one hand you are able to be smart about the money you make and spend having a feeling of being in control. On the other the money you save start bringing you more money.
Making a budget the right way won’t happen by the snap of the fingers. However if you really dedicate yourself to it results will come soon. I strongly believe that managing your own money is the fundament of being able to achieve financial independency.