The following is a guest post from LaTisha at Financial Success for Young Adults, where she writes about investing, trading and money management.
What Comes to Mind When I Say Budget?
Most people hear the word budget and cringe. I know because I used to do the same. The word budget is associated with tight pockets, home-made dinners, and do it yourself everything. What do you hear when you think of budget? “^%4&! I overspent again!” Seems to be a popular phrase, as well as, “Why can’t I balance this piece of $#!+ budget?”
Did you know that budget is actually a four letter word, and it doesn’t have to be censored?
That’s the four letter word that I associate budget with. After reading The Millionaire Next Door, I realized that many millionaires made their way one dollar at a time. Obviously they were assisted by smart investing and I’m sure they may have started out as a young entrepreneur; but in general they achieved wealth by saving, investing and budgeting.
How to Use a Budget to Get Rich
There is one basic rule to getting rich and building wealth. It is so simple that a two year old who knows how to eat Cheerios can grasp the concept. When you have a handful of Cheerios and you eat them all, there will be none left. If you eat all but one, and save that one for a rainy day, after saving a Cheerio from each day for a week, you will have seven Cheerios. (Obviously you don’t want your two year old saving Cheerios, but I’m sure you get the point.) The rule, similar to the Cheerio story, is to use fewer resources than what is coming in. In other words “Spend less than you make.”
It’s really that easy.
How to Spend Less Than You Make
Even though the concept is easy, I know that finding extra money to save can be pretty difficult. I’ve tried to squeeze a dollar out of ten cents before, so I know how it is. Here are a few tips to help you get started.
Out of sight, out of mind. Set up your direct deposit to go into two different accounts. One that you will spend from and one just for saving. When you save automatically, you will be surprised at how quickly your rainy day fund will grow.
Launch an Attack
Find one recurring expense in your routine. It could be a daily coffee or late fees every month, or the top tier Netlflix plan that you couldn’t possibly use. Find a way to eliminate or reduce that one expense. When I cut out going out on both Friday and Saturday nights for Saturdays only, I saved $120 a month! In a year that’s an extra 1,440 dollars that can go towards investing and make me more money.
Figure Out How Much You Make
Let’s face it, sometimes we don’t even realize how much we are actually bringing in. I had a friend tell me how amazed he was when he calculated what he made from his odd jobs as a teenager, it was over 25,000 dollars! It’s easy to spend mindlessly when you don’t mind your money. That is a budgeting basic that cannot be overlooked.
Do you see a budget as a way to get rich?
My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.