We already know that budgeting is a great way to keep track of your finances and account for where your money goes. According to a study done by U.S. Bank, only 41% use a budget to manage their money. Setting financial goals isn't easy, which we can conclude from 70% of Americans not even having at least $1,000 saved up in the bank.
With so few people in the country being able to cover an emergency of $300 or more, there's never been a better time to to get your finances in order.
Here are five basic steps you can take to financial freedom:
Calculate monthly expenses. The first thing you want to do is figure out how much it costs you to live each month. Understand the difference between one time expenses and recurring expenses, so you don't let high cost months effect your budget. Once you know how much you'll be spending monthly, you can put that amount against how much income you'll be bringing in.
Determine wants vs. needs. You don't need to spend every dollar that you do. Understand what costs are just wants, versus what you don't have a choice to spend money on. For example, although you may want to cut your shopping spending, if you need new clothes for work, then you can make an exception.
Make room for savings. Don't save what you can after spending, spend what you can after saving - ever hear that famous saying? Well it's true. If you can, the first thing you should when your direct deposit hits, is transfer money to your savings accounts. Once you saved how much you can afford to, then you can start paying your bills. But if you do the opposite, you'll end up thinking you don't have enough to save at all.
Set milestones. At what point in your journey will you feel like you've accomplished something? When you save $1000? When you have six months of expenses saved up for a rainy day? Anything that is a step up from your current situaiton is progress, is should be acknowledged.
Edit and repeat. Like any other process, it needs to be tweaked for best results. As time goes on, saving will be like second nature and you'll find new ways to increase your income and lower your expenses. Regardless of how much money you make, you should always be living below your means to ensure you can tuck something into savings.
How do you set financial goals for yourself?