I can’t tell you how many people I’ve spoken to who create a budget that looks great on paper, but which they just can’t bring themselves to live on for any period of time.
Is this because they aren’t disciplined enough or that they don’t really care about achieving financial freedom? Actually, it’s not either of those things.
Most likely, the budget which they’ve created is simply too complicated or restrictive and no one wants to live that way.
In this article, I’ll be sharing with you a simple plan for achieving financial freedom, one which you’ll have no trouble sticking with for the long haul.
The Simple Four Bucket Approach for Building Financial Freedom
If you’re ready to create financial freedom in your life, you don’t need to restrict yourself to living on a budget. Instead, you can focus your spending according to your most important priorities and according to four simple categories: paying expenses, saving for emergencies and future spending, charitable giving and finally investments. Of course, it’s essential that you have a structure as to how you’re going to prioritize these categories when it comes to your real life spending.
Here is what I’ve found to be effective:
1. 10% to investments
2. 10% to giving
3. 10% to cash reserves
4. 70% to expenses
This is how you are to distribute the funds of each check that you receive, in the above order and according to these percentages. It’s simple and it doesn’t require you to have 77 categories for your spending. Instead, you take care of your investing before you have the change to do anything else with it. If you make investing a priority in this way, you’ll start to create financial freedom very fast.
Next, you commit 10% to giving, and then towards building some cash reserves so that you don’t have to take on debt when you want to purchase something or when you have an unexpected financial event. Once this is done, you’ll find that 70% is plenty enough to pay your monthly expenses. The trick is to force yourself to invest your money first and to pay your expenses once that’s done.
Attempting to do things in the reverse order, paying expenses first, is a sure way to land yourself in the paycheck to paycheck loop for life. So there’s your simple strategy for controlling your cashflow, and you can get started on it right now.
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