It is crucial to know where your money goes if you want to get your finances under control. As much as you may keep track of your monthly bills, most people normally forget about their daily expenses.
When you add up your out-of-pocket expenses, you might be surprised at how much you spend daily on things like food and transportation.
Of course, the task is not as easy as it sounds, but you can successfully track your spending when you focus on a short period.
As you become more aware of your spending habits, you will be able to identify simple changes you can make to reduce costs and increase savings. This is the first step to creating a successful saving and spending plan.
With this in mind, here is an extensive example of a saving and spending plan you can adopt:
1. You Need a Budget
Just like putting yourself and sticking to a particular diet, you need a budget to control your spending habits.
For some, budgeting may seem a little tedious; for others, it’s a self-challenge to align finances.
Most people who don’t use budgets see it as a move restricting them from exploring their financial freedom. But the opposite is true.
You must have a budget to attain your financial stability – even if money is tight. They don’t have to be restrictive. An effective budget is realistic yet very flexible.
Moreover, the complexity or simplicity of a budget depends on you. They are generally based on income minus expenses and savings.
As you plan to start budgeting, remember that it takes commitment and consistency to cut and save to achieve your desired goal.
2. Be SMART about Saving
Being SMART means you will only spend your finances on Specific, Measurable, Attainable, Realistic, and Timely things.
The best part about using this method is that you aren’t depriving yourself of the things you enjoy in life. Instead, you’re making a small sacrifice to get them every day, week, or month.
You can use this method when setting both short-term goals, like getting a raincoat and long-term goals, such as a down payment on a house.
3. Differentiate Your Wants from the Needs
I get it. You might be craving some chicken wings. But do you need that for dinner?
It’s not bad to have chicken wings, and sometimes you can get them, but right now, you can choose to make dinner at home and save the money for your next month’s house rent to avoid troubles with your landlord.
Personal finance begins with understanding the difference between needs and wants and identifying yours. Your financial goals should align with your ability to say no when something doesn’t fit.
4. Pay Down Debt
Saving up may be so difficult if you owe people money. After all, depending on the loan specifications, you must pay the money plus interest.
Moreover, you’ll always find yourself promising creditors to pay before you even earn it, making it harder to live on what’s left over. That means you’ll have to borrow more.
If you already have existing debt, think about taking out a personal loan at a lower interest rate than what you owe now and paying it off all at once.
You can also find additional income sources through side gigs or passive income to help pay off debts.
5. Level Up Your Finances
After you have outlined your savings plan, you should look for additional ways to save. For example, consider saving the extra funds you receive at work if you receive a raise. And once you have built a stable emergency fund, it’s okay to move on to other goals.
Most importantly, make sure that you also invest in yourself by learning and developing your skills and building an investment portfolio.
6. Remember to Enjoy Life
Once again, all it takes to attain financial freedom is self-discipline. Even though we strive to tighten our belts and resist instant gratification, there’s no such thing as a perfect person.
Keeping up the budget doesn’t mean you can’t spend on the things you enjoy. Sometimes you need to relax and celebrate because it’s possible in a balancing act. As long as it fits within your budget, there’s nothing wrong with the occasional splurge.
