Part 1: Managing your expenses
Step one in finance is simply learning how to manage your money I think. No matter how much it is, but you need to start managing it like a master. Since we are not taught this at school most of us have to study it when they are older and take initiative by ourselves.
Did you know? It is not so much about how much you make, but about how much you retain. And also in what way. So even with a small salary, going steady and managing their money well for 50 years, a nobody could happily retire. Start by retaining it! – Which starts at questioning how much you spend every month.
What do you spend your money on?
have been writing down my expenses for years.Today I know exactly how much I spend in which categories. This gives me tremendous freedom and sovereignty.
Rent and utilities cost, medical cost, food, transportation/car/gas, insurances, holidays, taxes, gifts, clothes, heating, investments, edcuation, etc…Write down the most common ones and you will ad some as you go along.
Depending on which country you live in, the cost will be higher or lower in each category. That is something you could influence by the way. More about this topic from Nomad Capitalist.
But let’s continue…
2) Chose your tool
Today we have great tools and apps for managing our expenses. But the good old spreadsheet or note book works just as well. Whichever tool it is, stick to it and week after week and month after month, you will get better at using it efficiently.
For example if you just use a paper notebook you might want to stick to one page per week and then use a separate page to list all expenses of the previous month and draw a diagram of all your expenses. Do this every month so you can compare and find out what your large chunks of expenses are and see where there is potential to reduce or increase.
Start writing down the expenses after every purchase. It will soon become a habit, once you are getting used to it. Make it easy for you!
This is a work in progress and you will gradually get better. However, you need to stick to it.
Time to harvest your hard earned work. After every month you will be able to compare. Already after each week you will recognize trends and your ego might want to challenge yourself. Can I spend less on eating out next week? Do I really need this subscription or can I cancel it? Give in your impulses! That’s great!
There are some people who take this to an extreme. They are called cheapskates. It is up to you how far you want to take it. My offer to you is to show you a way of starting to MANAGE your money.
My values stand very much for honoring yourself and your needs and not for thinking small. Knowing your expenses and needs is the first step to financial freedom I think. Therefore DO claim what you feel you need and use these resources wisely.