Money was always tight when I was a kid. A simple treat, or pencils for school, could cause all manor of drama in my house.
That experience taught me about the importance of budgeting.
Disclosure: Based on personal opinion, not to be taken as advice. Seek a professional if required.
A Drama Free Life
ONE: LEARN HOW TO BUDGET
Budgeting is boring.
It’s only when you need some extra cash does it, all of a sudden, become slightly interesting.
To learn how to budget, read my post about creating a budget (there’s also a free printable budget sheet available).
If you need some tips to reduce your monthly budget, check out my 58 No-Nonsense Frugal Living Tips Used To Escape The Rat Race.
Once you’ve made your budget, stick to it for 3-6 months in order to build up some positive momentum.
A Stress Free Budget
TWO: CREATE AN EMERGENCY FUND
Your first 3-6 months of budgeting should result in a small savings pot. Now the goal is to create an emergency fund – that’s a savings pot large enough to cover all of your bills for 6 months.
An emergency fund means that, even if you lost your job, your bills would be covered -giving you time to find another job.
Also, if an unexpected bill arrived, you’d be able to pay it.
THREE: SAVE FOR LUXURY ITEMS
Once you have an emergency fund in place, you may start to think about spending your newly found extra cash.
But you shouldn’t, not yet.
It’s a good idea to save up the money you need first.
And even then, when you’ve saved enough, you should challenge your need to spend it.
I write about my frugal mindset here, for more tips in this area.
You don’t want to waste your money, or positive momentum, on a big purchase.
Finally, never take out a loan (layaway) to pay for luxury items.
The idea is to be stress free -not worrying about a red letter turning up.
Easy Personal Finance
FOUR: BUILD A SAVINGS POT /WEALTH
A savings pot is the final piece of the drama-free puzzle.
I’m not a financial adviser, so I won’t tell you how to invest your money. But, when I say savings pot, I’m talking about money you control.
I believe in diversity, as history has shown how turbulent our financial system can be.
The point is, it is good (for freedom, and for a drama free life) to build up a large pot of money. It may take time to unlock, but it’s there if you need it.
Drama Free Budgeting
You just need to get ahead of yourself, to sacrifice for awhile so you can build up some savings.
Then, keep a solid budget so you can grow your savings, rather than reduce them.
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