Last week we explored what to consider when creating a budget and assessing your current spending. This week we examine how to cut back on spending and how to create a life goals budget.
Cutting back on spending
Once I honestly assessed my current spending I evaluated what I could cut back on and drew up a revised monthly expenditure sheet. Although I felt a strong inclination to make major, often unrealistic, cut backs, I knew I had to be practical in terms of what I needed to live on whilst also being thriftier with my monthly spending. I also made a plan to pay off all debt, a non negotiable element of any budget.
To do this yourself, simply use the second column on the first sheet of my downloadable spreadsheet.
As you can see on my downloadable spreadsheet, once I completed my revised budget I could clearly see what I could save every month. This is critical as without a solid monthly savings figure it is impossible to effectively save for your goals.
Life goals budget
One of the most exciting elements of creating my budget was doing the life goals budget (sheet two of my downloadable spreadsheet). Go through all of your life goals and list them, remember to account for a six month of living costs emergency savings fund and life stage goals such as getting married, buying a house or having children.
The next step is to research the cost for each goal and enter it into the spreadsheet. Then add dates for when you will start saving and end saving – you can work out when you will finish saving by looking at the monthly savings figure (below your revised budget) on the monthly expenses and savings sheet. Then check your diary, planning when you will complete the goal and entering in your completion date into the spreadsheet.
TOP TIP: Create named instant savings accounts for each goal you are saving towards, it will make keeping track of your savings super simple!
Stay tuned – next Monday we will cover the monthly savings budget – a five year plan.
Are you inspired to create a life goals budget? What type of goals will you be saving for? Please share your thoughts in the comments below to gain encouragement, insight and support from our community, we’d love to hear from you.
‘How to Manage Your Money When You Don’t Have Any’ by Mr Erik Wecks