For most of my life I would spend money on things that were unnecessary, which everyone is guilty of doing at least a couple of times in their life. If you’re like Warren Buffett, then you analyze every financial decision and make sure you never purchase anything unneeded which takes a great amount of discipline and dedication, but it is achievable. So how do you stop this bad purchasing habit? Although everyone is different, I am here to share my story of the small adjustments I did that have saved me a lot of money in the long run.
I always knew I needed to budget my money, but I never knew where to start or how to start and the thought of it seemed too overwhelming. If you truly care about your finances then you will do as I say, or at least take it into consideration. You’ve already read this far, might as well keep going! The first step I did was I printed my bank statements from the previous 6 months and began using highlighters to categorize purchases. Trust me, I know, this sounds too painful to do but once you do it then it will open your eyes to your financial reality. I used a yellow highlighter for restaurants/take out, pink for gas, orange for clothes, green for bills, etc. Once I did this, I calculated how much money I was spending in each category.
I had the numbers in front of me showing exactly what my hard-earned income was being wasted on. From then on, whenever I would go out and find myself picking something up (a shirt, a menu, etc) I would ask myself DO I NEED THIS. There is a fine line between wants and needs, do not confuse them or persuade yourself that something is a necessity. Just like when you are asked a question by your boss, with a response that only requires a yes or no. There is no back and forth between yes and no, there is just a straight forward answer. Do this with yourself, tell yourself you are the boss, do you need this? Yes or no? Can you live without this purchase?
Once I got into the routine of separating my wants and needs, I created a budget for myself which was not used by any fancy app or any software online. I literally took a piece of paper and wrote at the top right corner “expenses” and listed all of them for the month. Then I put the upcoming date and amount of my next paycheck at the top left of the page then in the middle I put the next following paycheck date and amount and began deducting my expenses from paychecks assuring that all expenses would be paid on time. Once I realized how much money I had after my expenses I took out 10% of that remaining amount of put that into my savings. After the expenses and savings were dealt with, I took that final amount remaining and divided it by the amount of days I had until my next paycheck. This gave me an exact number to tell me how much I could spend per day.
For example, if you get paid $1,000 every two weeks then you would deduct the expenses and saving amount you have added up, will say for easy numbers, that equals to $600. Therefore, $1,000 (paycheck amount) – $600 (expenses and savings) = $400 (amount you have remaining after your expenses and savings have been deducted) divided by 14 (14 days until your next paycheck, assuming you get paid every two weeks) that equals $28.57 that could be spent per day.
This took hard work and dedication, and of course I slipped up a couple of times. I went on vacation and other unexpected expenses arose but I never lost sight of the goal. To become financially independent.
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