Budgeting is planning for the best and the worst. It’s what enables you to start accumulating wealth in a meaningful way. It’s what helps you move from living paycheck to paycheck to a life of relative ease and comfort.
A budget is a plan to take every cent that comes into your life, and channel it into pre-planned directions. It’s an important part of fiscal responsibility and personal financial development.
It’s hard enough to get used to following a budget when things are easy. Imagine how hard it will be when things get hard? That’s why you have to start now. Because, rest assured, rough times will come.
You’ll have a medical emergency, be forced to travel out of the blue, your vehicle will break down, or any of a million other strange and terrible events. These trying times hit fast, leaving you in a challenging mental place. You’ve got to have your financial plan prepared for the worst, long before the worst happens.
Here’s how I would recommend you do so.
3 Steps To Creating A Financial Plan That Works
#1. Know What You Value
The biggest downfall of many people is not knowing what they value. They spend money on things that don’t matter and then wonder why they aren’t happy and have no money.
If you take the time to figure out what you value, you will put yourself in better financial shape overnight.
The reason is simple. Once you know what you value, you stop spending money on things that you don’t value. This will allow you to have more money to spend on the things you do value and to save a lot of money as well.
For example, let’s say you value relaxing on the beach. You now know that it makes sense to spend your money on things that will help you to enjoy this value and reduce your spending on areas that don’t help you enjoy this value.
Maybe you stop buying new clothes every few months. Maybe you stop buying a new car every 4 years. It might sounds crazy but it’s incredible how well this works.
I used to spend money like it was going out of style. In fact, I ended up in tens of thousands of dollars in debt because I thought buying things made me happy. But it didn’t. It just made me depressed.
Once I figured out what I value, I stopped spending money on things that didn’t matter any longer. I suddenly was able to save 50% of my income each month. That has put me on a path towards early retirement, which is one of the things I value.