Considering that the majority of people never achieve financial freedom, it’s essential that you have an exact plan for getting yourself out of this majority right away. Most of us know how to control our spending and have at least an idea of a few investment strategies which we could use to accomplish greater results in our financial life. However, first it’s important to break old habits and get some momentum built up towards developing new ones.
Here are three steps you can take to start turning your financial life around today…
Step One: Get a Clear Picture of Where You Are
The first thing you need to do is start keeping a written record of your every day spending habits. This is a very important step which a lot of people skip because it doesn’t seem that important. However, you need to get a realistic look at your life on paper before you can start developing a plan for gaining financial freedom. Also, once you get a good look at your spending habits, you’ll be much less likely to tolerate second class behavior from yourself when it comes to over spending.
It only takes about 15 minutes a day to write down what you spent that day and after a month of this, you’ll get a more realistic look at what you need to do next.
Step Two: Get on a Written Plan
Once you start keeping track of what you’re spending, you can use that information to put together a written financial plan to follow. The four bucket spending system is the most simple and effective plan to start with. The four bucket system has you manage your spending of disposable income according to the following four categories: living expenses 70% or less, investing 10% or more, giving 10% or more, and reserves (to plan for future spending and for emergencies) 10% or more. Since you have a solid idea of what you’re already spending, the four bucket spending system will be easy to apply.
For best results, take care of your investments, your contributions, and your reserves. This is especially important because people who have control of their financial life take care of their investing and reserve goals before paying their expenses while broke people usually pay their expenses and try to take care of their other goals with what’s left over.
Step Three: Get Started Whether You’re Ready or Not
This might sound like an oversimplification, but it’s a step that so many people wait their whole life to take…and often never take. Your circumstances aren’t going to conspire against you to keep you from getting started on your financial plan, but they won’t line up perfectly for you either. If you want to have financial freedom and take control of overspending and get started on a good investment plan, the time to get started is right now. So make tonight the first night that you sit down and start your spending journal and get ready to apply the four bucket spending system.
It’s time to make a change!
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Image made available by Marian Kraus Photography Inc.
