Financial independence, becoming a home owner, having some extra money on top of a pension later on…
Many people have dreams like these, but don’t always know where to start making those come true. Saving money can be difficult and it’s not always easy to know how the money should be invested so it could grow and help us to get where we want to.
The good news is that you don’t need to know all the answers right now and can still start taking action. Here’s how.
The first thing is to take control of your money. If there’s no money left at the end of the month, there’s nothing to invest either. The trick is to spend less money than you earn on an ongoing basis, so your financial situation can become more stable. Once there, then you can start to make your money work for you, to grow your financial freedom.
So how do you take control of your money?
Take a hard look at your current spending habits and decide which expenses you will avoid this coming month. Is the daily take-away coffee a must-have? Are there any other expenses that are not really necessary? Choose not to spend any money on those this month and see how that works. Would you be able to eliminate those expenses altogether not just this month but in every month hereafter?
As the result of avoiding the unnecessary expenses you should start to have more money left unspent than before. Every penny you don’t spend can help you to achieve your goal. The less you spend, the quicker your progress will be.
Put the unspent money aside to a buffer, which is just another bank account you can set up for this special purpose. Keep growing the buffer month over month, and it’ll become your emergency fund for a rainy day. Having a buffer will help you to absorb the unexpected financial shocks of life, which is key to financial stability.
As soon as you have built a healthy buffer, say 2-3 times the essential monthly outgoings of yours, you can move on to the second stage, which is to make your money work for you. It is all about investing the money to grow your financial freedom over time, making use of the compound interest phenomenon whilst controlling the risks and keeping the costs down. I will cover this in my next blog post, so stay tuned.
This blog post is an overview of the first stage of The BORING Method, which helps you to gain financial stability and freedom with minimum effort. To learn more, please have a look at my book The BORING Method available soon.
What tips and tricks have you found useful when taking control of your money? Have you got a buffer already? Leave a comment below.