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Monthly Archives

August 2018

Saving Money

How to Cut Expenses

How to Cut Expenses in 3 Easy Steps

If you’re just starting out your journey to financial freedom, you’re probably feeling a bit overwhelmed. You might feel like there is nothing to cut from your expenses and have no idea how you’ll ever get ahead.

I promise you, there is a way. You have to do the work, but there is a way to get ahead, stay ahead, and start building wealth.

First, start with beginning to change your mindset around money. Make your budget and track your expenses to see where in the world your money is going each month. You can subscribe to my newsletter to get a free template to help you do this.

Once you have done your budget and are tracking your expenses, then you need to follow these 3 steps to cut expenses from your budget.

First Step to Cut Expenses

Once you have budgeted your money and tracked your expenses, you need to determine where all of your money is going each month.

See what areas you can easily cut out to free up some money in your budget. Do you buy coffee out every single day? Try bringing your coffee instead. It seems small, but a common problem is when small purchases add up over the course of the month turning a small daily expense into a large monthly expense.

Once you go through and find easy areas to trim out quickly, continue on with your month as normal. You don’t want to cut expenses all out at once because you will be forcing this change rather than settling into it.

Remember, you want to create new habits to make a life long change, not cut expenses to bare minimum and see how long you can go. There is a time and a place for that, like when you you’re challenging yourself to a no spend month.

Second Step to Cut Expenses

Once you have cut expenses that are easy, start thinking about what your priorities are. What do you find value in?

The best part about budgeting is that you get to tell your money where you want it to go. Have it go to what you value the most.

You’ll start realizing that some purchases you don’t find much value in and you no longer want to spend the money. Cut those expenses that aren’t valuable to you or bring you joy.

By cutting these expenses, it will allow you to free up money in your budget to go where you want it to.

Third Step to Cut Expenses

This can be challenging and requires another change in mindset, which is why it’s the last step I include. This can potentially be the hardest part, especially if you’re just beginning.

This also could be the easiest part for someone, it all depends on where you are in your mindset and how willing you are to change your lifestyle. .

Look at the expenses that you have to make each month and think about creative ways to make these areas more affordable.

Personally, I don’t find much value in where I live. Give me a bed, bathroom, kitchen, and somewhere to store my clothes and I’m good to go.

This is why I decided to move back home in order to pay off my $200k in student loans. The amount of money I can put towards my debt, about 75% of my income, while still investing and saving, makes it worth it.

Another area would be groceries, we need to eat, we can’t cut groceries from our budget unfortunately. But, we can choose healthy, budget friendly foods instead to lower our expenses.

Ultimately, this all comes down to finding what you value and what you don’t value in your life. by following these steps to eliminate the low value expenses, you will find more money in your budget to put towards the things you value and are important to you. What has helped you to cut expenses?

 

 

Financial Freedom

Change Your Money Mindset

Money Mindset

We focus a lot on the logistics of tackling our money goals. How much debt, how much saved, what’s the game plan to tackle this as fast as possible?

But, there is one step that seems to be overlooked and it is arguably the most important step to make long term changes.

We can fuss about the plan and the numbers all day long, but if we have the same money mindset and habits, those won’t really matter.

Initial Money Mindset

A lot of people that are working towards financial freedom start with similar mindsets around money. They most likely feel like they have no control over their money and don’t know how to make it work for them.

They usually fall into the cheap mindset because they are in a never ending cycle of scarcity. You don’t have the tools you need to help yourself out of this mindset.

You are constantly thinking about what you can’t do or can’t afford because you don’t think you have the money to.

Usually, you are only thinking about day to day, week to week, month to month. You don’t have any long term money goals because your money has the power currently.

An example of this is being anxious about making it to pay day because you don’t know if you will have enough money to get you there.

Money Mindset Change

As you begin and move through your journey to financial freedom it’s important to do the work. Don’t try to skip steps by taking short cuts.

Sit down and track your transactions, make your budget (get my free templates by subscribing to my newsletter) and see where your money is going each month. If you try to skip doing the work, you’re not changing your habits and you’re not gaining the power over your money.

Take control of your finances and tell your money where you want it to go by using a budget. Once you have this power, you start thinking about money differently.

You no longer think, “I can’t afford this,” but, “How can I afford this?” You have control over your money and you tell it where to go.

You’ll notice that you no longer think about pay day as much because you know where your money is, where your money is going, and where it will go once pay day arrives. The anxiety around money has been lifted.

An Abundance Money Mindset

Once you have moved to an abundance mindset, you will find that you feel complete control over your money. Money turns into a tool, instead of something that causes fear, stress, and anxiety.

Taking the time to work through the hard parts is so important to changing your own money mindset. Without changing your habits and your mindset, you will be stuck in the same place you always were.

Financial Freedom

Being Cheap vs. Being Frugal

Being Cheap vs. Being Frugal

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There is a huge difference between being cheap, and being frugal. These two words get used interchangeably, when they really are completely different. Yes, there are some things that will cross lines, but for the most part they are very different.

Being Cheap

Cheap means that you never spend any money and watch your money very closely. When you are cheap you spend the least amount of money.

When shopping, you simply are looking for the cheapest cost. When in reality there are many other pieces in play when determining “cost.”

Being cheap is usually driven from a place of scarcity or necessity. You don’t feel in control of your money, so you feel you must hold onto it.

Being Frugal

Being frugal comes from a place of abundance. You have power over your money and know exactly where it is going.

Instead of thinking solely about price, you take into consideration multiple value points. You think about cost, you think about how it helps others, you think about how long it will last.

These are just a few points, but you get the idea. Being frugal is being wise with your money and consciously choosing to be frugal with it.

Being Frugal vs. Being Cheap

An example of the difference between being cheap vs. being frugal that I experienced was bringing water to work. I would buy the cheapest water bottles I could find to refill when I was on the go in graduate school.

I was busy. I worked 8-3 and then had class from 4-7 every single day. I was working full time and attending school full time and making a measly $1,000/month on average.

What I found was that I was needing to buy new ones regularly because they were constantly breaking. I was living in a scarcity mindset because I didn’t have any extra cash each month.

Once I graduated, got my teaching job, and got my finances in order, I was able to move towards an abundance mindset. I no longer needed to live in this scarcity area.

I was able to see the other value points once I moved to an abundance mindset. My low cost water bottles I realized didn’t have much value because they were constantly breaking.

I took this into consideration, along with that they were always made from plastic, and researched higher value water bottles. Now, I’ve had mine for 3 years and it has dents and scratches, but it still serves the purpose of holding water.

This is just one example, but it serves as a reminder that there is a difference between being cheap and being frugal. It is all about the mindset you are currently living from. What are your thoughts about being cheap vs. being frugal?

 

Money Management

Why You Need to Start Cash Flowing

Why You Need to Start Cash Flowing

There are so many terms when it comes to personal finance and so many ways of doing things out there. I mean with a simple search on the Internet you will find endless resources for personal finance and how to go about getting your finances together. The most important is absolutely getting a budget together, cutting expenses, and increasing your income, but it’s also super important to create sinking funds and cash flowing larger expenses.

What is Cash Flowing?

This is one of those terms that is thrown around the personal finance world a lot and it makes sense, it’s super important. Cash flowing is when you have a larger expense and you delay the purchase until you have enough cash saved up for the expense. This tool is used when it is something you didn’t necessarily see coming (unlike a sinking fund that is for known expenses in the future). For example, I am cash flowing a new to me car instead of financing it. Of course, I could go out right now and get a car and finance it, but that would increase my debt. Something I am not interested in doing because I want to live a life of financial independence.

How to Start Cash Flowing.

You’re obviously not going to always use cash flowing, there is a time and a place. If it is a known expense that is happening in the future, like an oil change or yearly membership fee, you should have a sinking fund for it. If it’s something that you need to purchase and have time to save, then cash flow it. I’ll use my example of a new to me car. This isn’t an emergency and I have time to save for it. So, I’m adding money each month to a car fund I created. You need to decide where your priorities are and how quickly you want to cash flow the purchase. For me, I want to have it cash flowed by October, so I am sending a lot of my extra income from side hustles to this fund each month while still sending extra to my debts. Once you have made your decision, you can tweak your budget to find the cash for your purchase. Remember, a budget is not meant to restrict you, but to allow you to make the purchases you want.

Cash flowing has been a total game changer for me and my budget. Just by delaying a purchase until you have the cash to afford it, you can avoid putting yourself into debt. As I said earlier in this post, in order to obtain financial freedom, you can’t be burdened by debt and having to pay companies for past purchases with interest. Have you ever cash flowed a purchase?