A budget is a loose term that people use in many ways. Budget tips can come in many forms. A simple term for a budget is a way to manage your money so you are not letting it control you, but you control it. Having a budget not only helps you cut back on unnecessary expenses, it helps you pay yourself back.
You actually end up giving yourself a raise by simply eliminating unnecessary expenses so you can put it away for more meaningful things in life. A budget provides many benefits and we’ll cover some ways to help you gain better control over your money so you can start working towards financial freedom. Utilize these budget tips to get one step closer towards your dream life.
Track it
“What gets measured gets managed” as Peter Drucker says. Ultimately one of the best budget tips is to track your spending to see what area you spend the most amount of money in. A vast majority of Americans have no clue how much money they spend in a month. It’s also no surprise that they are victim to Lifestyle creep which is as your income Rises so does your expenses. By managing and tracking your money, you’re able to keep a closer eye on it. You can track your money in a few ways which we’ll cover in a little bit. More importantly, you need to understand the psychology behind tracking your money. it teaches you the principal of discipline.
By being disciplined, you are telling yourself you’re the type of person who deserves to get ahead in life. You’re telling your brain that you’re the type of person who earns his or her freedom. The simple act of tracking your money gives you much more confidence or where everything is going on a month-to-month basis.
As a result, It’s only logical that you Achieve Financial Freedom faster because you simply know where every dollar goes. In the next section will cover some budgeting apps that you can use to really take control over your money.
Budgeting Apps Software
One of the budget tips is to utilize software to track your money accordingly. Some recommended apps are:
- YNAB
- Mint
- Personal Capital
- EveryDollar
Each of these apps have their own special component that helps you understand where your money is going. My personal favorite is YNAB simply because it tracks every single dollar that you spend. You can use the automated service but I found that it gets pretty messy as there are often transactions that don’t get accounted for even though your bank accounts are linked up. YNAB has really thought of just about everything so it’s helpful to use their software.
At the end of the month you can then go into the reporting Tab and can check to see a full breakdown of how you spent your money for that month. One of my budgeting tips is to start out with a simple approach and try to manually input all of your transactions that you make and then if you feel like you’re ready, move on to the automated option.
Mint and Personal Capital are also great software’s. They both have benefits more so on the side of net worth and big picture reports.
For example, Personal Capital gives you a high-level view of how your net worth is performing. You can sync up all your bank accounts, credit cards and Investments to see a live view of debt to income percentages along with the monthly cash flow that you’re receiving.
It’s actually a great tool and I would recommend it so you can see how much your net worth is. IT’s not great for tracking your expenses.
Every dollar is another great app to use. On this app, you set a predetermined amount on what you aim to spend a month. The second you make a transaction, manually enter it into the app and it tells you how much money you have in relation to that category. One of my budget tips is to manually enter these transactions as It can get messy if it doesn’t update some transactions along with reimbursements you spend and more.
Track Your Budget The Barebones Way
My personal favorite is to do with the old barebones way. This is something I recently started doing. Truth be told I used to use all of the above budgeting apps and found myself quite overwhelmed as I didn’t feel like I really knew where every single dollar was going.
Now I just use a standard Google Sheets spreadsheet and I am able to track every single transaction that comes in every month giving myself full confidence in the control over my expenses.
The best part about this is there is full range to do whatever you feel like you want to know in regards to your money. you can create a formula for any situation and you own the spreadsheet so you can do whatever you want.
I used this spreadsheet format to manually track all of my expenses. You’ll need to go into Google forms, enter a transaction, that will then get sent to Google Sheets and it gets automatically inputted into the transactions page. It takes a few minutes to get used to it and I’d recommend putting in a couple test transactions to see how it works before you use it real time.
Not to mention, it’s completely free to set this up and use it. The other platforms have free options but they aren’t a software that I would use and rely on for all of my money tracking purposes. It’s your money, take full control over it in a way that makes you feel confident.
Pay Yourself First
The next budgeting tip is to pay yourself first. Simply put, the second you get a paycheck, allocate a percentage of that towards an investment account. Personally, we aim to put away at least 20% or more of our paycheck immediately towards real estate Investments. Once we save up enough money for the next down payment, we simply will purchase the investment property and begin again. Now your situation might be different.
Or maybe you love collector coins. While I can’t tell you what to do with your money as I am not a financial advisor, you should definitely focus on investing in items that you know love and can make money from.
In my personal opinion and many others around the world, real estate investing is one of the greatest ways that you can invest your money. It does provide you with a monthly cash-flow as long as you structure the deal correctly and you buy at the right price.
I can cover this in another article down the road but invest for your future!
As your income rises and expenses decrease, your savings rate should increase even more. Simply put your savings rate is the difference between your expenses and gross Income.
If I earn $6,000 and spend $4,000 as long as I invest or put away the $2,000, my savings rate is 33%. Always always always pay yourself first, it’s the most important thing you’ll do. Because if you can learn how to live on 80% or even 50% of your monthly income, no guarantee the fast track to Financial Freedom.
Focus on the end goal for your budget
The final budgeting tip I have is to figure out what goal you want for yourself and work backwards.
- If your ultimate goal is to retire 10 years from now, how are you going to achieve that?
- Is your house completely paid off?
- How much debt do you have?
If you have no house payments no debts and no obligations, you simply need to find a way to earn enough income to speed up this process. Rather than penny-pinch and cut out the $10 you could save on eating out, focus on the velocity of earning an income producing asset to get you there much faster. Let’s say you earned $50,000 a year and spent $25,000 a year. Traditionally, most people will want to invest their money in the index fund VTSAX. While I’m all for that, it does come at a relatively slow path to financial freedom. Likewise, if you were to invest in an income-producing asset like real estate for example, you give yourself additional cash flow every single month.
Let’s say you purchase a multi-family home of 4 units and rent each one out for $1,000 a unit. Now let’s assume the mortgage is $3,000 a month. You don’t have to pay utilities because you should always make sure your tenants pay those. So with an extra $1,000 a month in cash flow, you’re halfway to retiring early.
Let’s say you do this one more time, you know have two properties that cash flow for a total of $24,000 a year. Let’s say just for fun you wanted to go crazy and buy an apartment complex with 8 units which cash flows an additional $1,500 a month. Now, in let’s say 5 years, you have $3,500 in monthly income that comes in no matter what. And this is the bare minimum, let’s just say you rented some of the units on Airbnb and it brings you an even more income. You might even surpass $5,000 a month.
I understand these are all hypotheticals but I’m just trying to get you to see that life doesn’t have to be the slow and boring way of waiting 20 to 40 years to retire. You can easily retire in 10 to 15 years by investing wisely.
Whatever that end goal is for you, focus on it and make it your guiding light as you work towards making your dreams a reality. Let me know if this blog post help you in any way and I’ll talk to you soon.
- Eric