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The Art of Smart Spending: 7 Basic Steps to Financial Freedom

The Art of Smart Spending: 7 Basic Steps to Financial Freedom

Modern life has its fair share of stresses and pressures and the fast life we lead tends to put a strain on us. Life can have a lot of sources of stress, but one of the things that can really impact all aspects of your life is having financial problems. This is especially problematic for young people who have just started to earn their own paycheck and still don’t have control over their spending habits.

If you are having difficulty stretching your budget till the end of the month, you might find these tips helpful. We are going to give you basic advice so that you can apply and create some financial breathing space for yourself. It is amazing what you can accomplish when you remove stressing out about money from your daily routine.

1. Track your spending

First thing’s first, you need to know exactly how and what you spend your money on. Most of us develop a lot of, let’s say hedonistic and impulsive spending habits. In most cases these individual purchases are not a big deal, but they tend to rack up to a substantial amount. By analysing your spending, you will be able to identify unnecessary expenses and neutralize them.

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You can use your smartphone or tablet to write down your purchases and make it easy to keep track of your spending. Once you go through one month of tracking your spending, categorize your expenses and pinpoint those that you consider to be excessive and damaging to your monthly budget.

2. Manage your bills right away

One of the biggest financial complications that you can create for yourself on a monthly basis is to miscalculate your spending capabilities, go on a shopping spree and then end up not having enough money to resolve your bills.

This is why it is a good practice to avoid spending money before your manage your bills and actually have an idea how much money you can spend without going over your monthly budget. Keep in mind that not managing your bills properly will transfer into the next month and can create long-term trouble.

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3. Play mind games with yourself

    One of the basic approaches you can take is to actually convince yourself that you are outright broke. Whenever that little voice inside your head goes: “You’ve had a hard day, you should treat yourself”; add a big voice that goes: “You are as poor as they come, start meditating for stress relief.”

    This may seem as a bit harsh, but it is necessary and you need to work on your self-control. Once we start earning our own money, we tend to start spoiling ourselves and the mentality that it’s our money and that we can do whatever we want with it is all well and good until debts come knocking.

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    4. Getting things done with a bad credit score

    Usually, being under financial strain means that you also have a bad credit score. This can create problems for you when you want to take care of something that you sorely need, but your options are limited due to your inability to get a bank loan. In some cases, there are banks that specialize in giving credit to people who others consider incapable of taking up credit.

    Sometimes they specialize in a particular type of credit, but you’ll need to be very careful when you do this, since there are both good and bad sides to this, and since you are taking up more financial obligations in an already strain situation, you want to make sure that the good outweighs the bad. Furthermore, if you take the time to get your self-control, well, under control you’ll be able to improve your credit score, just be sure to avoid drastic measures that can hurt you in the long run,like payday loans and similar offers.

    5. Change can be a lifesaver

    Ok, so you went to work, took a stroll through town, got some coffee and finally got home. Now, pull out a jar, a bowl or something and drop all that change that you have left into it. Most cynics are probably going “Yeah right, some loose change is going to save my budget”, but you’d be amazed at how much money you can save like this. Furthermore, you are not strictly relying on change to save you, it is a cumulative effect and every little bit counts.

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    6. Tax deduction is an art

      It is a bit difficult to address this money saving option because the benefits and laws vary from country to country, but there are always ways to pay less taxes and save money. This requires extensive research and complicates your paperwork a bit, but once you get past these initial difficulties the amount of money you save is well worth the effort. Charitable donations are a good example of doing something good and getting a tax deduction, but there are many more options out there.

      7. Forgetting about extra cash to boost your savings

      If you get a raise, pay off a loan or get some other influx into your budget, you might want to keep “paying” for it a bit longer. Think about it, the habit is already there and all you need to do is transfer that extra cash into your savings account. This is probably the easiest way to build up your credit score and boost your savings account without really having to change anything. You’ll still need that cash influx though.

      Don’t let things spiral out of control, act fast and get things in order before things become too much for you to handle by yourself. It might sound stupid, but the bigger your debt, the faster it grows. It’s far better to tighten up your belt and take a couple of months to get things in order than to constantly stress about being in the red.

      Featured photo credit: https://www.pexels.com/u/paul-kunitsky-12238/ via pexels.com

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      Ivan Dimitrijevic

      SEO Consultant

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      Published on September 17, 2018

      How Being Smart With Your Money Leads to Financial Success

      How Being Smart With Your Money Leads to Financial Success

      Achieving financial success is not something that just happens. Maybe if you win the lottery or something, but for the average person like you or me, it comes from a series of small steps you take over a long period of time.

      With each step, you form a new smart money habit. And with each smart money habit, you build towards financial independence.

      So what sort of habits can you form to get on that path? Let’s take a look at smart money habits you can start today to get you closer to a financially independent future.

      1. Avoid being “penny wise but pound foolish”

      It’s tempting to try saving a couple cents here and there when buying small items. However, that’s not where the real money is saved. You’re putting in extra effort for something that doesn’t move the needle.

      You get the most bang when you’re able to cut down on your bigger bills. For example, finding a lower interest rate for your mortgage could save you $50+ per month. And cutting your transportation bill by purchasing a cheaper car or taking public transportation can provide large gains as well.

      So, look at your recurring expenses such as housing, transportation, and insurance, and see where there’s wiggle room. It’s a much better use of your time than trying to pinch pennies here and there on smaller purchases.

      2. When you want something big, wait

      Impulsivity can get you in trouble in most aspects of life. Finances are no different.

      It’s human nature to see something and want it right then and there. It starts as a kid in the checkout line at the grocery store, and it continues on through adulthood.

      We get an idea in our head of something we want, and it’s hard not to go out and get it right then.

      A good example is wanting a new car. Perhaps you’ve had your car for several years. It’s crossed the 100k mile mark. Maybe maintenance is due, and you’re annoyed that you need to replace the timing belt or purchase new tires.

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      So, you get the itch.

      You start digging around online, and you realize you could trade in your current car for something newer and more exciting… all for a few hundred bucks a month. Then you get obsessed.

      Here’s where you have to take a step back.

      Your newfound obsession is clouding your judgement. Rather than giving into the impulse, wait it out.

      Set a timeframe for yourself. Maybe you come back to the decision three months down the road. See if the obsession lasts.

      It might, but often, a funny thing happens. Often, you forget about it. And often, you find that the new car wasn’t a need at all.

      The impulse faded. And you just saved yourself a ton of money.

      3. Live smaller than you can afford

      You finally get that big raise. And you want to celebrate – and why not?

      You’ve been looking forward to this forever. And after all, it was all due to your hard work.

      That’s fine, splurge a little. However, make it a one-time deal and be done.

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      Don’t get caught in the trap that just because you’re now making more money, you should spend more.

      Too often, people get more money and feel like they that gives them the means to buy a bigger house, a bigger car… you know the drill. Resist.

      The fact is that living smaller than what you can afford is one of the fastest ways to build savings.

      But if you constantly upgrade as you begin to make more, then you’ll never get ahead. You’ll just build up more debt along the way and have just as little wiggle room as before.

      4. Practice smart grocery shopping

      Food… it’s one of the biggest portions of any budget. And if you’re not careful, it can be one of the biggest drains on your wallet.

      But luckily, there are a few things you can do to ensure that you stay smart with your money when buying groceries.

      Create a grocery budget

      Set a strict weekly grocery budget. When you know how much you can spend on groceries, you can then plan your weekly menu around it.

      Once you know what all you need, you can go shopping and keep a running tally as you shop to ensure you’re on track.

      I tend to do this in my head, rounding for each item. However, writing it down as you go would probably work best for most people.

      Make a list… and never deviate

      Never go to the grocery store without a list. If you go to the store with a ballpark idea in mind, you don’t have a true ide of what you need.

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      You’re not well-researched. You don’t know what the sales are. As a result, you’re going to make decisions on the fly.

      These impulse decisions will lead to overspending, which will derail your grocery budget.

      Eat before going grocery shopping

      It’s also important to eat prior to going to the grocery store. Hunger is a powerful force.

      If you’re shopping on an empty stomach, everything is going to look good. In particular, you may find a lot of ready-made, processed snacks will look enticing.

      After all, you’re hungry now and that food is easily available. So subconsciously, you may lean towards those items.

      Unfortunately, not only are those items typically less healthy, but they’re likely more expensive. You pay for convenience.

      However, when you eat prior to shopping, then you’ll shop with a clear mind. Your hunger won’t cloud your judgement, influencing you to make poor decisions like a cartoon devil resting on your shoulder whispering in your ear.

      This makes it much easier to stick to your grocery plan.

      5. Cancel your gym membership

      Now that you’re all set on your food, it’s time to get smart about managing your budget in terms of physical fitness. And let’s begin by avoiding the gym. The gym bill, that is.

      The average gym membership costs around $60 per month. That’s $720 a year.

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      Yet, two out of three gym memberships go unused. That means two-thirds of people who have a gym membership are literally giving away almost a thousand bucks a year. It’s crazy!

      I recommend seeking an alternative. One good alternative is to look into fitness streaming services.

      Streaming services allow you to stream hundreds of workouts like Insanity and p90x, right in your own home for around $10-20 a month. That’s $40-50 less a month than the average gym membership.

      Of course, then there’s the free option. The internet is full of free workouts that you can do on your own with minimal or no equipment.

      For example, there’s the Couch to 5K program, that I personally used a decade ago to ease myself from couch potato to running my first 5K race. If I could do it, anyone could.

      Then there are free resources like reddit that have limitless information on workouts. The Fitness subreddit has done all the research for you, populating workout tips and detailed workout routines for anyone to use in their wiki.

      There are several routines that require no equipment. And you can join in on the subreddit to become part of the community, making it easier for those seeking comraderie and encouragement in their fitness goals. All for free.

      It’s baby steps… And baby steps can start now!

      I’ve never met anyone that can’t stand to be a bit smarter with their money. And on the flip side, anyone can get smarter with their money. But remember, it doesn’t happen all at once.

      Begin by fighting your impulses. Prepare for the week and be smart at the store. And cut monthly expenses like gym memberships that are overpriced and you probably aren’t getting your money’s worth out of anyway.

      The devil is in the details. And the details can change your lifestyle and prep you for a financially independent future.

      Featured photo credit: Unsplash via unsplash.com

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