The first step towards reaching any financial goal is learning to live within your means.
Whether you’re saving up to buy a house, you’re trying to pay off your debt or you want to have a nice savings cushion in your account, just in case, you first need to learn how to live within your means. The fact of the matter is that you will never make any progress towards reaching your financial goal if you spend more money than you have coming in. At Goal Plus, we understand just how difficult that can be, and that’s why, in this blog series, we’ll be touching on experts tips to help you live within your means.
#1. Get familiar with your income and expenses.
In order to live within your means, you first need to understand how much income you have coming in on a monthly basis, as well as what your expenses look like. Creating a budget will allow you to do just that. Start by making a list of any income you may have. This should include your job, of course, but also consider pension, side work or any other income that you may have. Then, make a list of all of your expenses, like the mortgage, bills, groceries, gas, etc. Once you have a good idea what your income and expenses are, subtract your expenses from your income, and the money that’s left over is what you have to save or spend each month.
#2. Keep a close eye on your spending for a month.
Understanding your income vs expenses on paper is one thing, but understanding where your money goes in real life is often a whole other ballgame. That’s why keeping a close eye on your spending for a month is a great idea. This will allow you to easily pinpoint areas where you are spending more than you thought you were. Coffee is a great example of this. Every time you get coffee in the morning, you spend a few bucks. It’s such a small amount that you may not even realize you’re doing it, but when you’re spending $4 every day on coffee, that means that, for the month, you actually spend $120 on coffee. Chances are, you’ll find more than one area where you can cut back by simply changing up your habits or routine.
#3. Identify your wants and your needs.
Some of your expenses are needs. These include the mortgage, utilities, pet food, gas, groceries, etc. And, while you may be able to save some money on those needs, like by buying generic groceries instead of name brand or switching to an insurance company with lower rates, for the most part, your needs will be fixed. Your wants, on the other hand, are where the biggest opportunities are for finding additional money to save, invest or pay off debt. Decreasing the money you spend on your wants might include watching a movie at home instead of going to the movies, making your own coffee istead of buying a latte, packing your lunch instead of going out to eat and many, many more. When you separate out your wants and needs, there’s a good chance that you’ll identify some needs that are really just wants in disguise.
Before you can reach your financial goal, whatever it may be, you need to learn how to live within your means. We hope that these tips will help, and to learn more tips, please make sure to stay tuned for our next blog. Until then, make sure to download the free Goal Plus app. This financial planning help will help you to set your goal, track your progress and much, much more. Download Goal Plus today!