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How to Keep Your Personal Budget Under Control

How to Keep Your Personal Budget Under Control

Waking up one day and realizing that you don’t have that much money left to use this month is surely nothing nice. I’ve had it happen a couple of times and it wasn’t pretty. It’s not that I don’t have any common sense; the core of the problem sits somewhere else—bad money management.

personal budget

    So how was I able to fix it, and how you can do the same? There are some steps that need to be taken, but before I can tell you what I mean let me explain what this post isn’t about: it’s not about how to make more money, it’s not about saying no to the nice things in life, and it’s not about starving. It is, however, about being aware of where most of your money goes, and about being conscious of your spending habits.

    Monitoring is the first step

    I’m sure you’re familiar with the saying that what gets measured gets improved. This is a rule that’s valid for your personal budget as well. If you want to keep things under control, you need to start by paying close attention to what you’re spending money on. Now, this isn’t the moment where you should restrain yourself from buying something you’d normally buy. It’s just about writing down your expenses and keeping them for later analysis. Keeping note of very expense sounds like a lot of work, but the 21st century comes to rescue.

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    If you have an iPhone or an iPad (or an Android device) then you can use one of many personal financing apps that are available out there (image below).

    iPad-apps

      There are both free and paid solutions, such as:

      I didn’t have the chance to test them all out, so choosing the exact app you’re going to use is up to you. You can start by going to the App Store and searching for either “budget” or “personal finance”, but make sure that your app allows you to:

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      • categorize your expenses
      • add expenses on specific dates
      • add your salary and any income you have
      • input all costs using your local currency
      • change the currency (optional, if you’re spending money in more than one currency)

      One month head start

      Unfortunately, you won’t be able to do everything overnight: you need to spend some time getting data and building your spending profile, so to speak. Usually one month is enough to gather a sufficient amount of data, but if your spending habits are a bit more unpredictable then you might need more time. During this initial month, make sure to set a habit of noting down every expense you make by putting it into your chosen app. Remember to use the right categories, as this will be the only way you’re going to able to analyze this data later on.

      Let me say this again: categorization is key to success here.

      For instance, you can divide your expenses into these categories: rent, food, going out, coffee, alcohol, bills, gas, entertainment, education, etc. This is also a good opportunity to input your salary and any other profits you’re making (e.g.: freelancing, securities, bonds, stocks).

      Review

      When the month is over, it’s time to review your expenses and take notice of all possible areas for improvement. As I said before, the key here is to look at categories of your expenses: some of these categories are completely mandatory, like rent, or your electricity bill, so you can’t do anything about them. Others are not mandatory, but they are part of your “joy of life,” so to speak, so you wouldn’t necessarily want to get rid of them. The rest, however, may prod you into making some conscious decisions and taking a different direction with your money.

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      Start by looking at each category and deciding if you’re comfortable with the amount of money it costs you. If you’re not, then try to find cheaper alternatives or erase some expenses completely. For instance, one of the most interesting revelations for me was that I was spending an incredible amount of money on coffee. The first step I took was the decision to drink more coffee at home as opposed to going out—this one step cut my coffee expenses in half.

      This is just an example, but I’m sure you can see the potential that lies in this method. The more you categorize your expenses, the more areas of improvement you’ll be able to find. Again, this isn’t about lowering the quality of your life—it’s only about erasing stupid expenses and finding new and improved ways to experience as much joy in life and spending less money at the same time. Of course, if the amount of money you spend is more than the amount you earn, then you’re in a lot of trouble. Once you input your salary, every personal finance app will let you know about such a situation.

      When you have all your categories sorted, you can move to the next phase.

      Planning

      The final step is to plan your spending for the next month. Now, this isn’t about writing down what you can and cannot buy, but more about placing some simple guidelines in the back of your head. Things like: drink coffee at home, don’t buy more than three beers at a time, don’t use credit cards to buy cheap items, buy less clothing, and so on.

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      If you manage to pay attention to such guidelines for the duration of the next month, you’ll surely be able to lower some of your expenses with no loss in your quality of life. Actually, being aware of our personal budgets is not that difficult once we realize one thing: the devil is in the details, and when it comes to personal finance, details = small expenses.

      Subconsciously, we all know this. If we’re planning to buy something big—and I mean massively big like some Fort Worth real estate or a new car—then it doesn’t actually affect our monthly budgets. I mean, we always have everything carefully planned out, and know how much we can afford to spend exactly, and how much the investment is going to cost us over the years. However, buying something small here and there doesn’t seem like it can hurt us, but when we add everything at the end of the month, we can see that all those small things have turned into one surprisingly big bill.

      Personal finance apps help us to notice this and then take the right action… as long as we remember to put every expense into the app. I strongly encourage you to give it a shot and check how much money you can save. For me, the change has been significant, to say the least.

      What’s your take on this? Have you faced any surprising problems when dealing with your daily expenses?

       

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      Karol Krol

      Blogger, published author, and founder of a site that's all about delivering online business advice

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      Last Updated on April 28, 2020

      9 Millionaire Success Habits That Will Inspire Your Life

      9 Millionaire Success Habits That Will Inspire Your Life

      As technology evolves and information becomes more accessible, it has also become more challenging to define success. A lot of people are trapped in the rat race while trying to discover the actual formula for success.

      You could become overwhelmed with what tools, techniques or philosophies to imbibe while trying to get tips over the internet. At every click and turn, there are ‘how-tos and quick-fix’ on how to become successful overnight. You will find several courses, articles, videos and books on how to achieve financial success.

      But what if I tell you it doesn’t have to be complicated as people made it out to be? What if you could achieve success by merely following these 9 millionaire success habits?

      1. Read for Personal Development

      A daily habit I have discovered millionaires share in common is reading. For instance, if you are an entrepreneur, you need to read to become an efficient leader and a productive business owner. Reading helps you to grow and learn without going to a business school.

      A research conducted by Thomas Crowley indicates about 85% of self-made millionaires read at least two or more books each month. [1] Warren Buffett is one of these examples. He spends 80% of his day reading. In the early days of his investment career, he would read 600 to 1000 pages in a single day.

      While millionaires sometimes read for pleasure, they also learn to improve themselves. They read topics on leadership, how-tos, self-help, biographies, lifehacks and also follow current events.

      Here’re some recommendations for you: 25 Best Self Improvement Books to Read No Matter How Old You Are

      2. Establish Multiple Sources of Income

      Another success habit I noticed about successful people is that they don’t depend on a single income source. Every millionaire possesses multiple sources of income. This helps them to manage economic challenges and also make more money.

      They are passive income addicts. They earn interests from loans, rental income from real estate, royalties from intellectual properties, dividends from investments. They also launch a side business or run a website or sell information products.

      How income is made either passively or actively is what separates the successful from the wannabes. They are always learning ways to build multiple streams of income.

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      3. Live on a Stipulated Monthly Budget

      An average millionaire does not believe in luck and jackpot. They take the time to understand cash flow-income and expenses. Based on this, they establish a monthly budget and religiously stick to it.

      The essence of the budget is to minimize unnecessary expenses. This will help you gain complete control of your financial life. Budgeting helps you to avoid overspending to achieve your financial goals. Here’re some tips to help you stuck to your budget: 32 Hacks for Sticking to Your Budget

      4. Manage and Maximize Money

      The most significant education for a millionaire is financial intelligence. Nobody attains financial freedom without gaining financial intelligence. This is the more reason millionaire, regardless of their income, keep their knowledge about tax strategies updated.

      They always seek to reduce their tax bills. One approach they employ is by living or incorporating their business in states with no income tax.

      Do you know that about 60 companies paid $0 legally in the 2018 tax year? Some of these companies that ‘avoided'(note: not evaded) federal income tax include Chevron, Amazon, Halliburton, General Motors, Delta. Their US income was totaled at $79 billion with an effective tax rate of -5%.

      What’s the deal? They got a tax refund.

      How do they accomplish these?

      An ITEP report indicated that they have the culture of throwing huge sums at tax experts who assist them in discovering creative, as well as convoluted means of paying little tax as much as possible.[2]

      5. Avoid Debt

      Another habit that separates the millionaires from the rest of the world is how they manage debt.

      They don’t live an extravagant lifestyle; instead, they only buy what they need and can pay for. They do not book hotels and flights by using their credit cards to pay for them.

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      They are conscious of the interest rates even when they use credits cards or take loans. If possible, they try to pay with cash because of its zero percent interest rate.

      6. Set Daily Goals

      It does not matter if they are setting up a business, a career, or financial projections; they have the success habit of setting short term goals. They plan daily and weekly goals to generate momentum in achieving their long-term goals.

      Ensure you prioritize when setting daily goals. This will help you to achieve the most important to-dos on your list.

      Setting priorities will help you to focus on highly rewarding activities. If you desire financial freedom, it is wise to pursue activities that earn you thousands of dollars rather than hundreds of dollars.

      7. Don’t Act Rich

      The goal is not to act rich but to be productive. Interestingly, Thomas Stanley buttressed in his book that for the most prestige brands of cars, about 86% percent are toys of the non-millionaires. While most believe that people with huge fortunes tend to drive exotic cars, in reality the largest consumers of pricey cars are aspiring millionaires.[3]

      According to findings by Experian Automotive Researchers, 61% of individuals who earn $250,000 or more rarely buy luxury brands. Instead, they buy Hondas, Toyotas, and Fords like the rest of the world. The reason is they are not ready to spend money on premium cars that tend to drop in value in a couple of years as it would cost money. Millionaires invest in assets that appreciate.[4]

      8. Own or Buy Businesses

      In Robert Kiyosaki’s cashflow quadrant, he divided how you earn income into four quadrants. The E and the S quadrants take the left position while the B and the I are on the right side. According to Robert, it is possible to be on all quadrants, but the millionaires are not.[5]

      • E stands for employee – they work for others
      • S stands for self-employed – they work for themselves
      • B stands for a Business owner- employees work for them (500 or more employees)
      • I stand for Investors – Money work for them like Warren Buffet.

      Your goal is to move from the left quadrant to the right quadrants where you own big businesses or make money work for you.

      It is possible to become financially successful by pursuing what you love. For instance, if you love writing, aspire to be the best seller. Wealth and passion work together.

      Check out How to Start a Small Business with Little to No Money for tips.

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      9. Avoid Get-Rich-Quick Scheme

      A millionaire holds patience as an essential virtue. It takes patience to become successful, not only in finance but in every aspect of life. While it is possible to become financially successful at an early age, most millionaires hit it at age 50. They live a moderate life, invest in their future and retire rich.

      Bonus: How to Develop the Millionaire Success Habits?

      Having learned these habits, the next question is,

      How can I develop the Millionaire Success habits?

      Here are six values you will need to develop:

      Establish Your Life Vision

      You need to be clear about what you want in life to set yourself for a life of success. Your vision has to go beyond becoming a millionaire to understanding why you want to become one. Any great entrepreneur you will ever find has a clear vision and an established mission.

      Understanding why you are doing what you do will drive you to become the kind of successful person you want to be.

      Make Your Passion a Profession

      When your passion becomes your profession, work becomes pleasurable. Loving what you do enables money to flow to you and through you.

      So what’s going to be? Wake up every morning by speaking positive words into your work, love what you do, and focus on the work that brings you joy.

      Take a look at this article and learn how to make it happen: 5 Steps To Turn Your Passion Into A Career

      Focus on Solution

      Focusing on the solution means establishing the problem that you or your business address. This will help you focus on the solutions when others are faced with challenges.

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      A millionaire has a mindset that is fixed on the solution. He or she knows there’s a way out, and that every problem is an opportunity in disguise.

      Improve your problem solving skills with these tips: 6 Effective Ways to Enhance Your Problem Solving Skills

      Develop Your Leadership Skills

      Leadership skills are an asset that is indispensable if you want to develop a millionaire success habit. The more you hone your leadership skills, the more you will attract leaders who share your values.

      Be Growth-Focused

      Millionaire entrepreneurs prioritize self-improvement. Here’s how to achieve it:

      • Get a coach. Coaching will impact your life, and you will achieve peak performance in life and business when you have a life coach.
      • Be coachable. It is not enough to have a coach; you must be coachable. Sometimes, you need feedback and counsel to reposition your life and business. A coach has the wisdom and experience to counsel you from a higher perspective. The more you receive feedback and work on yourself, the more you become better at what you do and who you are.

      Flip Your Thought Pattern From Acting To Being

      It is not enough to have a millionaire success habit, you must also become a person of positive influence. This is how you can become significant. Bill Gates is not only rich; he is changing lives in Africa and different parts of the world.

      If you want to become successful, you must first be and think like a successful person. This is how resources you need can flow into your life.

      Here’s a final thought from me:

      It is not enough to do something to have something; success is about being someone who possesses what is needed to take positive and inspired actions.

      More Success Habits

      Featured photo credit: Austin Distel via unsplash.com

      Reference

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