In my early childhood my Mother always encouraged me to save money. I had a piggy bank where I will save when I break a bill while I go shopping or any leftover changes on the table. My mother usually gives me additional money when I reach a target saving amount and during my birthday and special occasions, my parents used to deposit additional money in my bank. I will always look for different opportunities to save money. A few years later, my parents took the money and deposited in a saving account at a local bank. Five years later my money doubled, I was so happy and proud of that.
At that time I did not have many opportunities to spend my money and I was very dedicated to save to hit the target. When I fast forward and look at me now, I earn more money but at the same time, I spend more money. I get it I was a little boy at that time no major commitments, but now I have a family and I have to spend the money to take care of all the expenses. I realized when I was single and started earning, that’s when I started picking up a bad habit of not cutting down simple and redundant expenses, and not saving enough money. When I was planning to make a major investment and I have to put all my expenses under a microscope to see if I can afford it. That’s when I realized I have to start making changes on how I spend and save. I’m not saying I did not have any savings at this time but I did not have any discipline on my expenses and there were opportunities where I could have saved.
One fine day after so many days of procrastination, I spent some time in consolidating and analyzing my expenses. This simple thing helped me until now to make any major financial decisions.
- Consolidated my monthly expenses and categorized it like groceries, gas, insurance, pet, subscriptions, interest, etc
- Majority of the bank allows to download the monthly statement in a Microsoft Excel format, so I took the last 3 months of my expenses and categorized each one of them.
- Had a column in the sheet to determine if the expense is mandatory or variable or not needed.
- Significance of doing this to determine whether the expense is absolutely necessary like phone or utility bill or mortgage payments. “Variable” expenses are like I can reduce the money I’m spending in this category and “not needed” is definitely where I should not be spending my money.
- Typically during summer, I like to do outdoor activities and I don’t spend enough time in the gym. Only during winter, I need a gym membership, so during summer, I freeze my gym membership account for a minimal fee.
- HBO Subscription — I’m a huge fan of GOT, so I took a subscription to watch the season and later I canceled the subscription.
- Budget will help you to set a limit on the variable categories to ensure I don’t cross the limit each month. I have to discipline myself to make sure to stick with the budget.
Now I do this every 3 months to see where I spend money, stick within the budget, and cut down unnecessary expenses.
When I got married, my wife preached me a new principle about savings. She wants us to save minimum of 20% of the income every month before it hits our bank. Any investment or expenses that we make should be based out of 80% of our income. I loved this idea because this always gave us a financial stability in the long run and confidence to make a decision without any doubt. One time I saved some additional money with 80% of income and used that to invest in stocks. The stock investment did not turn out good and I lost close to 70% of the money, even though I lost the money my financial situation did not de-stabilize. Now I’m waiting patiently to recover. 🙁
When I interact with my friends, relatives or work associates I always hear them complain they don’t have enough money to make any investments. This post is to all of them who truly say that, this simple step will provide a clear picture of your expenses where you can make a decision on how you spend and save money. With discipline and patience this will yield you better financial growth on long run.
PS — This is my first blog post, I want to share my life experiences and simple things to fellow netizens. I appreciate your feedback publicly or privately.