As you’ve seen from the previous part about creating a budget, First, you need to figure out what you make monthly. Then, figure out what you’re normally spending on each area of your life. The four categories are:
- Fixed costs
- Savings
- Investing
- Leisure
Once you have those things figured out it’s time to move on to the next step.
Allocate your money
You need to put your money into separate buckets or accounts so that you know exactly what you are spending on each thing and you’ll know once you’ve hit your limit and won’t be able to go over it.
For example: you can spend 50% of your money on fixed costs such as bills and food. Then you want to save 10% of your money for things such as emergencies, vacations, and large purchases. Next, you can decide to invest 20% of your monthly earnings towards retirement and put it into the stock market to grow. Lastly, you can use the last 20% of your earnings for guilt free spending. This way you know exactly where all of your money is going. Once you have the important things covered, you know you’re doing right with your money and can spend the guilt-free money on whatever you love.
The trick to this is having separate buckets for each of these categories so you don’t accidentally spend to much and mess up your finances.
You can set automatic transfers to go from your savings account (where you deposit your check) to automatically pay bills, move money towards investments and savings, and put the rest into your checking account to spend on whatever you deem worthy.
Stick to this system and you will be surprised by how much your money grows and you will find yourself having more money than you realized. Now that you have optimized and automated your spending it is easier to track your spending and make sure you’re spending your money on the things you love. Automating your budget takes a lot of the hassle and worry out of finances and you will find your life much more enjoyable and stress free after making these changes.
Once this is done it should feel like a huge weight is lifted off your shoulders. You no longer have to second guess your purchases, you either have money or you don’t. This is a life changer.
For more resources on money management and investing I recommend: https://www.iwillteachyoutoberich.com/
Check out part one of budgeting here.
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