Financial crisis is not only created by a lack of money. Your attitude is at least somewhat responsible. Having the right attitude about your expenses can guide you towards financial freedom.
It’s human nature to desire more than what we deserve. This habit, however, can trap us in a web of debt. Extravagance without saving will never liberate you from financial consequences—most bad.
If you are a spendthrift and eat and sleep on credit, you’re only asking for trouble. In order to restore your finances, budgeting becomes a crucial first step.
Reasons for Budgeting
A budget gives meaning to your financial decisions. It helps you see the cause and effect of your choices. A budget helps you realize that spending is a zero sum game. Spending too much in one area can make your life miserable in other areas. A budget is proof to yourself that money doesn’t rule you—you rule your money.
Setting up a Budget
1. Create a spreadsheet using Microsoft Excel or Google Docs to track your income and daily expenses: Be sure to track every expense, even the small amounts. Use a single column and include both income and expenses in the same row as a running tally. It’s basic but it allows you to see where you stand on a cumulative basis.
2. See where you can cut down: After a few weeks tracking everything, look for the large drops in your running tally. This will help you spot the bigger expenses. Now you can start asking questions. Are these expenses necessary? Can I cut them down or out completely?
3. Check your expense pattern after a month: If you still find any discrepancies, try cutting back to essentials only. Even if you think you can’t cut back, it’s not hard to tighten your belt for a month. Take a spending sabbatical. Make it a game to see how little you can spend over the course of a week.
The key to financial freedom is determination, discipline, and commitment. If you’re ready to safeguard your future, setup a realistic budget now for a less stressful life later.