Budgeting. Aside from taxes, it may be the very last thing you think of as a fun thing to do on a Saturday. And yet, as anyone who has done it effectively will tell you, creating a workable budget is the first step to finding true financial freedom. By knowing how, when, and why you spend, you can more easily align what’s going out with what’s coming in. Plus, you can create a systematic plan to reduce debt, grow your savings, and even have a bit left over for that occasional splurge on something that really makes your heart sing.
If you find it hard to believe that the rewards of budgeting are worth the “pain” of the process, my friend Andy just might change your perspective.
In his early 30s, Andy is at a point in his life where he feels like he shouldn’t have to worry about money. He and his wife, Carmen, have a nice home with a reasonable mortgage that’s just the right size for their family of five. They live well but not extravagantly. After staying home with the kids for a few years, Carmen recently went back to school to add a second future income and, at least in theory, take the pressure off their finances. The goal was to pay off the bit of debt they’d accumulated, including a new car Carmen needed to haul their family of five, and start some serious saving.
When Andy and I sat down over a beer last spring, he was not quite the happy, jovial guy I am used to hanging out with. His family’s finances were going in the wrong direction. Instead of decreasing their debt, the numbers were growing. And even though every dime spent was stressing him out, coming to an agreement with Carmen on the direction of the dollars was difficult. For the first time in his marriage, he was worried that money was becoming a real issue—for their bank account and for their relationship.
Fast-forward to last September. As soon as I saw Andy’s face, I knew he was in a completely different—and much better—place. Since we’d talked, he had taken real action to tackle the family budget. He and his wife had sat down together and taken a good close look at what they were spending. He told me they had started by tracking every dime they spent and then working together to figure out where they could comfortably cut back. They put a firm budget in place, even temporarily switching to flip phones, and the results were fantastic. In just under 7 months, they had erased a substantial amount of their debt except for their mortgage. He said that with the money stress gone, he and Carmen seemed closer than ever. And because they really knew what they could afford each month, they both felt a sense of freedom they’d never had before. Best of all, they were saving for a special trip to celebrate—on top of increasing their monthly contributions to their savings.
Luckily, Andy and Carmen recognized the problem early on and were able to get on top of their spending before it created a bigger crisis. But it’s easy to find success stories of people who have erased huge amounts of debt by following a simple process. No matter where your finances stand today, taking the time to create a workable budget is your next best step toward true financial freedom. Here are four simple steps to help you get there:
Budgeting can be as simple or complex as you choose to make it, but the key is to find a method that works for you and stick to it. Like Andy and Carmen, making the effort now will help you take control of out-of-control spending and help you eliminate debt once and for all. Better yet, it will give you the power to use your hard-earned cash to support the lifestyle you want to live while making smart, swift progress toward your long-term goals. That’s true financial freedom!
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