So many people today struggle to reach both short term and long term financial goals. I don’t blame them, either because they don’t teach this stuff in school and it gets complicated. Figuring out how to overcome debt, how to save to buy a house, how to invest and how to achieve financial freedom are all vital parts of any financial plan but the issue is, no one really has any idea how to organize their spending and strategize how to improve their earning ability.
This article will go over a few key steps you can take to improve your ability to save for your short term goals in addition to:
So, let’s get started.
Many of us have trouble getting motivated to actually build a budget because it feels so meaningless.
You might ask yourself, “why am I doing this?” and you’ll answer “because I have to spend less.” While that’s not incorrect, it’s also not very motivating or exciting.
This is why, as we help our clients figure out how to save for their short and long term savings goals, we start with the life and future you want to afford.
For example, if you want to buy a house that costs $500,000 in 3 years and you believe you can afford at that time, a $2700 a month housing payment… you’ll need to save $100,000 between now and then. If you assume a 10% rate of return and start with nothing… you’d have to save $2,383 a month as per my partner’s calculator. If that house is something you really want in 3 years because you’d like a family and to be able to ensure the cost of living won’t force you out of the area… then you probably should start saving.
b. Your life is 10% about what happens to you and 90% how you react
They key personality trait that separates people whom are self-made millionaires from those whom aren’t is 1. How they react to the hands they’ve been dealt in life and 2. Their tolerance for delayed gratification.
Many of us want to to be able to afford:
…but we know we can’t afford all of it right now. Some of us may go out to eat more often than we can afford or get that car anyway and just hope that sometime in the future, we’ll earn more so it’ll be okay.
That’s not smart because you’re spending like you think tomorrow will be better. The fact of the matter is, this means that your financial plan is moreso based on a hope and a dream because we don’t know when or how much you’ll earn when things are better, if they ever are. Live on today’s salary; not tomorrow’s hope.
Buy those things when, even after your monthly savings goal and lifestyle have been paid for and you still have a lot extra… meaning, once you earn enough where spending more doesn’t matter. If you can’t save the dollar amount you need to in order to buy the house and experience the future you hope for… it means you can’t afford the lifestyle you have and should spend less, not more.
c. Make budgeting easy on yourself; aim to have low fixed expenses and don’t stop hustling.
The first step in all, easy-to-follow budgets is to have low fixed expenses. By choosing the less expensive home, the less expensive car, meal-prepping, getting generic medication rather than name brand, buying in bulk, etc… you’ll be able to save much more easily because you’ll have more money to save and your finances will feel far more under your control.
This means that, when you have a great month financially, go out to eat more and celebrate by spending half of the extra income you didn’t expect (and save the other half) but also when you have a bad one, don’t spend money you don’t absolutely have to and you’ll be fine.
The second step is to earn as much as possible. This might include investing in professional designations, additional degrees, starting a small business on the side or or or. Whatever it is, aim for this side-hustle to be simple, low stress and high paying so it doesn’t get in the way of your primary job and it helps you reach your goals.
We’ve all been there. Work 10 hours one day and you’re driving home in the rain or snow, you’re exhausted mentally, emotionally and physically and the absolute last thing you want is to cook.
What do you do, instead? Probably Door Dash or a Drive-though.
You justify it by saying “I make good money and I can afford this!” but this is the 3rd time this week you’re spending $50 on one meal. This is now a habit that’s costing you literally $600 a month (or $7,200 a year). 3 years of using Door Dash 3 days a week and you could literally buy a car, pay off your student loans or take 2 killer trips to Europe. Is it worth it for those greasy tacos after a long day? Probably not.
We all spend emotionally at times. When we’re grieving, tired, stressed, angry, drained, happy, excited, overjoyed and celebrating. This isn’t to say we should all stop celebrating or mourning and be perfectly objective at all times but to be conscious of our spending and try to spend more purposefully.
Whatever emotions you’re feeling, think about them logically else you’ll hurt yourself.
Having trouble sticking to your spending plan? You may need help. Contact us by clicking here and we’ll help you create habits that stick and help you make the progress you hope for.
All financial planning is, is strategizing how best to utilize the extra money you earn every month that you don’t need to afford today. That’s why all plans start where you are: with a budget.
We are big fans of the 50/30/20 budget. Why we love this style of budgeting is because it’s simple, easy to use and easy to follow.
How does it work?
A maximum of 50% of your take home salary is spent on NEEDS. This includes housing, transportation, food, utilities, insurance and healthcare.
A maximum of 30% of your take home salary is spent on WANTS. This includes anything that you objectively cannot live without. This wouldn’t include going out to eat, vacations, online shopping, Netflix, etc.
Lastly, a minimum of 20% of your take home salary being either saved or used to pay down debt.
Because most people don’t like to update a spreadsheet every week with your weekly spending and sort each line item into a certain column of needs or wants, we believe everyone needs to sign up for some budgeting software, free or not.
For tracking your spending, we’re a fan of the following budgeting applications:
Once you’ve organized your spending, ask yourself the following questions:
The fact of the matter is, if you don’t know… it’s highly likely that strategy to afford the future you hope for is based on a hope and a dream. In our opinion, that’s not good enough. Take the first step by requesting a complimentary appointment, below.
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