I was fortunate enough to experience a great time out at a restaurant with a few friends after many years of being apart for family and work reasons. We were looking forward to meeting up and talking about what's new. During the years we still kept in contact so we knew what we were all up to, thanks to today's ever-expanding social networks. It was over a meal that we discussed how life in general was and going from one job to another. As we discussed about old times we were looking at the menu to see what we could order. It was then that we got talking about the high price rises in some basic dishes. In today's age, for the consumer this is to be expected unfortunately. A main meal, steak with salad and chips was close to $45, excluding drinks and after-meal refreshments.
The conversation turned to how tough life is and how we all try to "scrape by" so to speak. I was a little frustrated to hear this from one of my friends as I know that they do like to spend money on non-essentials in excess such as custom made golf clubs and quality named products. I have no objection to such items if one has the budget / finance to cater for these luxuries in life. So to hear my friend saying that he scrapes by was upsetting in a way. I realise that times are tough, but if you spend unwisely on non-essential items that can bring you debt then surely priorities are not right here. We have all done this in the past, but I'm sure we can all learn from our experiences. Which is why I would like to introduce a very common sense 4-step outline to change those bad 'unwise' habits.
1. The Budget
This is a must for everyone that needs to be in control of their finances. It doesn't have to be fancy, a simple Microsoft Excel spreadsheet can be put together to create one. If you do not have one, then you are in the red already, and may not know about it. Do you know where your money is going? Do you know how much you are spending? Have you broken up your spending in categories to see where your money is going? You may be surprised to see if you do. I encourage you to take the challenge and see for yourself where and how your finances are taking you. If you find that creating a budget is all too hard, there are some really useful applications out there that can help you every step of the way. Some with tutorials and free guides to assist. Consider personal finance software such YNAB and Quicken.
2. Save, Save & Save
If you save money, you will have more money! It is common sense and advice that works. It is easy to say, but at times hard to do. But if you are like my friend whose habit is to spend un-wisely then unfortunately saving money will be hard to grasp and money will simply slip through your fingers. Please don't use the excuse my friend uses, that is to say that in order to save money I need to have money. Although true to some extent, this is not the correct way to approach this subject of saving money. Saving money is really an attitude and not a number. If you believe that then you will see the number grow. By that I mean if you do not change thinking ability and attitude towards saving then you will never successfully save. After our discussion my friend has tried saving $50 a month and has been doing so for the past 8 months. He now has $400. That money she saved is growing every month and not 'slipping through his fingers' as he rightly told me.
3. Take Control of Your Spending
After understanding what savings is and putting on the right 'attitude hat' for savings, it is even more important to not go overboard and make your savings plan difficult. By that I mean spending should be controlled. Your savings should grow whilst your spending should be less. I guarantee you that if following this technique and strictly following your budget plan you will start to live from next month's pay check. For some, and sadly too many, living on each month's pay check is the only option. We do not condone this as this is not the point of the article. Everyone's situation financially is different and we just want to outline the important attitude one should have on how to save and achieve living off next month's budget.
If you are making ends meet, then constantly spending $45 on a premium steak (for example) when you could opt for chicken fillet is not wise. When you are simply getting by, spending over $40 on premium beer when you can opt for a lower and cheaper beer is also not wise. My friend is now suggesting that we think about purchasing two-ply toilet paper compared to three-ply. Well, I think you best be the judge to that as we are only trying to help people budget and not telling people what or not to purchase.
But you see the picture we are trying to paint. Understand your financial situation by identifying where your money is going. Not long ago my friend was interested in how they could save more. I suggested that we look at not only spending habits but identifying what essentials he needs. Phone bill for example. We cut the bill by half simply doing online research with other competing cell providers to get a better deal. Utilities, gas and electricity. Again, look at the market as many organisations are competing and will try to give the consumer the best possible deal for their money. In the end, we managed to save over $75 per month by switching providers. That's a $75 on top of the $50 he is already saving. Come the end of the year, this goes a long way.
4. Do Not Give Up
No doubt that you can now find ways where you can save money. If you are already, good on you! But do not stop there. You need to be in complete control of your finances. Constantly re-evaluate your situation. I personally sit down and every month re-assess where I need to fine-tune my spending and also re-adjust my budget. My budget is changing, but I stick to it. Like we analysed above, there are many ways to cut off from the budget, and add to other areas. As humans we do think that we need to spoil ourselves and give ourselves things that we really could use without. Sure, this is Ok once in a while, but don't fall for that trap, as debt is lurking round the corner if you fall into this bad habit. Have an emergency account where you can use in case of a car breakdown or insurance that needs to be paid. I budget $100 a month on my car insurance and when my yearly re-new comes I am prepared, thus not relying on my pay check for that month. Consider that when you are doing your budget. Perhaps your situation might be different. You may wish to save for your children's college fund or a savings account which pays high interest, or some other reason.
I keep emphasising common sense and having the right attitude towards saving. My friend has also looked at online investment accounts where high interest is paid by the bank for simply increasing your savings. Now not only is he saving $125 a month he is reaping the rewards of his interest credits and other areas of low spending. He doesn't rely anymore of his pay check alone, and is on the road to living off next month's budget.
If you are interested in reading more about how to save and managing personal finances, visit our website which has reviews of software as well as other informative finance articles to assist, http://www.yourbudgetangels.com/
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