Almost all of us have a dream to become financially independent and live an amazing life that everyone is dreaming off. If the time and luck support, anyone can be a millionaire or a billionaire or at least live a life without worrying about finance. But not only the time and luck cannot create millionaires if you don’t know how to keep them, then it’s of no use. This is what actually happens in those lucky lottery winners. They get a huge amount on one day, they don’t know how to deal with it. Spend something, buying unwanted things on the next day, investing in unreliable places and finally on a day everything has vanished. You may hear that the dishonest money dwindles away, but whoever gathers money little by little makes it grow. Wealth from sudden rich schemes quickly vanishes; wealth from hard work grows over time. The harder it is to earn, the more you will have, because you know how to handle it properly.
Another important thing that you keep in mind is, stop buying things that you actually don’t need, to impress people you don’t even like (your enemy or your neighbor or your colleague). Most of the people purchase a new item only to impress their opponents, not for them. Actually, it will divert your spending habit and your house is filled with hopeless craps. On the basis of my personal experiences and from the comments and suggestions of others, I decided to write this post to help you to obtain financial freedom.
Keep a Notebook or Diary
This is the first thing that you must do if you want to grow your wealth. I myself tried and tested various methods but writing down your budget is the most effective. Yes, the old fashioned way, the pen, and paper method are still effective. Divide the expenses into two, fixed and variable. The fixed expenses include house rent, conveyance, food, mortgage payments, utility bills (electric, gas, water, and telephone bills). Also, note down your monthly income from all your sources. Calculate and analyze your income and expenses per month. You must know where your money is going and avoid overspending. You have a financial goal, plan it, allocate it and attain it.
Use a Computer Spreadsheet
If you have good at Excel program or Google spreadsheet, you can use formula and budget formats to enter and analyze the transaction and income in the spreadsheets. If you are a newbie to the real world and independent, you have been spending more than you can afford. You need a personal budget spreadsheet to track your daily budget. You can get a free personal budget sheet from vertex42, Microsoft Office templates, Google free spreadsheets (login to view the spreadsheet).
Use a Personal Finance Software
You can use a web-based or a desktop based program with a companion mobile app that can sync seamlessly in the background to track your income and expenses. You can find a number of items from the web, I just mention some of them to get an idea about how it works.
Quicken helps you to view your banking, investment, retirement, and credit card accounts in one place. You can analyze what’s coming in and what’s going out. You will get alerts about your bills, so you never miss a due date. You can review your portfolio, monitor performance, and see market comparisons to make your buy or sell decisions.
With Mint, you can create budgets and see their suggestions based on your spending. You will receive alerts for unusual account charges, and get custom tips from Mint for reducing fees and saving money.
You Need A Budget
You Need A Budget (YNAB) is the name of a budget tracker. they say, their Four Rules are the key. You can learn their method and you could budget successfully (blindfolded, with one arm tied behind your back-their website claims!). You can access real-time information, from any device, anytime, and can share finances with your partner (think twice!). Eye candy graphs and charts help you to analyze your progress. There is a trial version available for 34 days, so you are comfortable to test their methods.
Use a Personal Finance Mobile App
The new gen apps are there to track your expenses. Nothing can be better than having a simple mobile app in your pocket for tracking personal finances in real time. Here are some apps that I noticed in the play store.
Money Manager Expense & Budget
(Money manager in Play store)
Money Manager helps you to record your personal and business financial transactions, generate spending reports, review your daily, weekly and monthly financial data and manage your assets with Money Manager’s spending tracker and budget planner. You can also view the Money Manager application using a Wi-Fi connection. Easily edit and sort the data by date, category or account group on your PC is an added advantage than other apps. You can observe fluctuations in your accounts indicated on graphs on your PC. I installed and currently using this app and works flawlessly, but I didn’t test the PC version because I don’t have paid version!
(Mobills in Play Store)
Mobills is a budget planning app that allows you to create a custom monthly budget to take control of your money. You are able to manage your money, track your spending, and achieve your financial goals all in this app.
It is not as easy as you think. Budgeting is not restrictive. We can’t spend less even we decided to spend less (it can, then better), the best option is to spend right. We need to track down our daily expenses (need to make it a habit, otherwise we don’t do) and analyze our spending habit. If high take the remedial measures for the upcoming months.
Not only spending less saves your life. Its all about setting and reaching your goals. You need to define a goal (like build a new home, a family trip, buy a car) then setting new, bigger goals, and doing it again. It works, I set a goal and add a fixed amount each month into a SIP account and instructed the bank to deduct it from my salary when I get the salary. I do it within the salary week itself. This small amount added in each month finally grew into a big amount at the end of the year and I used it to purchase the right thing that I intended. Now I have a few goals and I am investing in each goal every month. Otherwise, I will spend that money to buy something or spend carelessly.
There is a 50:20:30 rule of Budgeting, it says that you should spend 50% on your needs, 30% on your wants and keep 20% for your savings. You can adjust the ratio as per your life. It is a good idea to do some calculation on 30th of every month, by taking a notebook, write down the saved cash, balance in your bank account, balance in your pocket, credit card payments, remaining loan payments, your goal value and all other finances that you need to bring on record.
It is a good idea to download the monthly bank account statements and credit card statements in excel sheets, also save as pdf files in your computer or laptop in a secured private folder. Remember, application in youth makes old age comfortable. Easy come, easy go, but steady diligence pays off, so save every penny and get rich.