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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
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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.

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      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

      Ivan is the CEO and founder of a digital marketing company. He has years of experiences in team management, entrepreneurship and productivity.

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      Last Updated on July 20, 2021

      Financial Freedom is Not a Fantasy: 9 Secrets to Get You There

      Financial Freedom is Not a Fantasy: 9 Secrets to Get You There
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      Have you ever considered your life now, and how it would be if you had more time to spend with your family and less worries about money?

      Nowadays, financial stress is one of the most troublesome weights in life. If you’ve ever encountered financial stress, you know the difficulty of not having enough income to pay your obligations or bills.

      Many people say that money is not the ultimate goal of life. While that’s true, money certainly plays a very significant role. The meaning of financial freedom changes with the different phases of our life, but ultimately, it is something that many people strive for.

      In this article, we’ll explain how to capture that financial freedom you’ve been looking for. Read on to learn the secrets to financial freedom.

      Break Free of Your Finances

      Financial freedom is about having a constant flow of cash from your assets to cover all your regular needs.

      When you are not worried about your income, or living paycheck to paycheck, you gain a great sense of freedom. It’s the freedom to be obtain and do what you truly need to make your way through everyday life.

      Gaining financial freedom, though, is a process of growth, making small improvements and gaining emotional strength.

      Though it seems hard to believe, it is really very simple to get financial freedom.

      To do so, you simply need to make sure that your assets exceed your liabilities. In other words, you’ll need to find the sweet-spot where your residuals meet or surpass your expenses. This is something that you can achieve with the proper plan.

      While not every person will accomplish financial freedom, the potential for anyone to do so is certainly there. Anyone can achieve this success, regardless of their income level.

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      Outlined below are 9 secrets that will help you in your goals of achieving financial freedom.

      1. Stop Unnecessary Spending

      We often spend money inwardly, instead of objectively.

      For example, you may spend when you’re anxious, depressed, restless, exhausted, from fear of missing out, or to please others. This is a very unhealthy way to handle your finances.

      To stop this habitual spending, log down all your spending over the course of a month.

      Just as some people keep a food diary, keep an expense diary. Remember not to just write down how much and what you spent the money on, also include the circumstances of why you spent the money. Was it an impulse buy at the checkout line or was it something you planned to purchase?

      This increased self-awareness could enable you to avoid triggering situations in the future when you are considering an impulse buy.

      2. Plan a Monthly Budget

      This is a great opportunity to get serious.

      Take a seat with your spouse or partner and make a monthly budget based on your income, not your expenses. You are never again going to spend more cash then you have on hand.

      Overspending is the thing that led you to more financial obligations. Make sure you decide every month what is coming in and what will be going out and stick to that budget… no matter what.

      3. Cut-up Credit Cards

      Perhaps you are the type of person who always pays your credit card balance in full before the end of your billing cycle, and enjoys the reward points you gain. If this is the case, then you’re already way ahead of the game.

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      If not, you may want to consider ridding your life of the burden that credit cards bring.

      Many cards have strategies set up so that if you make a certain number of late payments, they will raise your interest rate much higher. This can really add up in the long run and you won’t be doing your financial situation any favors. If you’re prone to late payments or have a large balance due on your cards, cut them up!

      Without proper self control on credit card spending and payments, you are basically throwing your money away. To ensure that you have better control over your spending, use only cash or debit for all future purchases (and don’t forget to pay at least your minimum payment on your cut-up cards each month!).

      4. Increase Savings

      There is no doubt that for a comfortable retirement you must accumulate satisfactory savings throughout your working life.

      It’s good practice to save up to 15% of your income.

      Start with your workplace 401(k), if you have one. If not, a Roth IRA (if you are eligible) or a traditional IRA (if you are not eligible for the Roth) are the next logical steps.

      Increase in longevity means you might be able to look forward to 25 to 30 years in retirement, or possibly even significantly more. Investing now in good retirement plans will ensure that you have a guaranteed a stable monthly income when the time comes to stop working. [1]

      5. Invest Wisely

      Consider investing in funds.

      Specifically, you will gain higher returns if you invest in different types of mutual funds such as Debt funds, Equity funds and Hybrid funds with a proper balance, although it absolutely relies on your personal preferences and sense of risk taking.

      To get the most of these benefits, make sure you are investing in a variety of assets. Another resource of investing in mutual funds is SIP (Systematic Investment Plan) where you invest some money every month in funds. SIP works by averaging the per unit price of the stock.

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      Mutual fund investors are aware of the benefits of an SIP (Systematic Investment Plan). For one, it is the most secure way to invest in equity mutual plans so that wealth is created over a long period of time. This plan also helps you to gain a better sense of financial discipline, which will come in handy in all your financial endeavors.

      6. Invest in Gold

      There isn’t really a better way to invest in gold than to have the physical gold itself in your possession.

      You can purchase gold coins and bars from mints as well as from coin dealers and other private sellers.

      Another way to invest in gold is through ETFs (Exchange Traded Funds).

      These are is similar to mutual funds but they are exclusively investments of gold. ETFs are great because they offer more liquidity; the ETF owns the actual physical gold, stores it, and retains the value of the shares. These shares can then be bought and sold in the stock market, and one big benefit is that the transaction costs of gold ETFs are much lower than the that of physical gold.

      With its consistently-increasing demand, investment in gold can be very wise long-term investment to make.

      7. Stash Emergency Funds

      Whether it’s a cash gift or a work bonus, always try to save any extra money that comes your way rather than making unneeded purchases.

      If you get paid every other week, you’ll get an “extra” paycheck (three rather than the usual two) twice a year. Either save those paychecks towards your emergency funds or utilize the money to pay down other obligations, such as loans, credit cards or other debts.

      Make it hard to get your cash.

      Put your savings in an alternate bank, maybe an online bank that forces you to delay for several business days before transferred money hits your regular bank account.

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      8. Find Fabulous Mentors

      Find a mentor, such as a friend or family member, who has exceptional control over their finances and pay attention to everything they do.

      If you do not have any friends or family that are enjoying financial freedom, then find a mentor online! There are numerous blogs and guru websites featuring the advice of many people who have reached financial freedom, and they exist primarily to let you in on how to achieve it for yourself.

      There are also plentiful forums available that share tips and tricks on how to best achieve financial freedom. Read as much as you can and start changing your habits for the better.

      9. Be Extra Patient

      Patience is the key of financial success.

      Being patient can be quite tough, especially when you’re struggling with your finances, but having faith is worth it. You’ll continuously be on the right track if you are taking the proper steps above.

      So don’t be discouraged, even if you are only saving a few dollars a month; it all adds up. Within just a few years you’ll look back proudly at your accomplishments and be glad that you had the patience to get there.

      Financial Freedom for All

      Anyone can achieve financial freedom, regardless of their financial circumstance.

      Use the tips provided above to get yourself on the track to financial freedom and toss your monetary concerns out the window. If you wish to achieve a life with financial freedom for yourself and your family then you must adopt a disciplined approach towards your finances.

      Following the simple secrets above is a great start to making your money work for you, so you can work less and live more!

      Featured photo credit: rawpixel via unsplash.com

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      Reference

      [1] Hartford Gold Group: IRA Retirement Accounts

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