Part 1 – Save your money and spend less
I’ve previously posted my reasons for choosing financial freedom.
Well, in honor of April – National Financial Literacy Month – I thought I would elaborate on one of my most popular posts.
Disclaimer: I do not work in finance. I do not have a degree in finance. I never even took a class in finance. My advice should not be considered a financial service or a substitute for that of a financial advisor. This is simply the method that has worked for me based on my own personal experience.
In 8 Reasons to Choose Financial Independence, I discussed the reasons I fight for financial freedom. Why I work every day to get out of debt, build an 8-month emergency fund and contribute monthly to my retirement account.
Today is part 1 of this 4 part series, and it was a tough one. In case you’re new here (welcome!) or you haven’t been keeping up (for shame!), I left my corporate office job this past November. Not to go into specifics, it just wasn’t the right environment.
That’s why today’s two topics hit especially close to home.
How to avoid financial crisis and find stability
1. An 8 month emergency fund
Thank goodness I had my 8-month emergency fund. I was able to put in two weeks’ notice when I needed to and walk out the doors on my last day without another job lined up.
It helps that I had just finished reading Vicki Robin’s Your Money or Your Life.
Some environments just aren’t right. Some jobs just don’t fit. However, money should never be a reason to wake up miserable. Nobody should feel trapped in a job simply to pay rent.
Take preventative measures now in case a situation ever comes up where leaving your job is necessary. Trust me when I say, the unexpected does happen. Hope for the best, but prepare for the worst.
2. Spend less than you make
Like I said, I walked away from the corporate world with a very vague idea of what I wanted to do next. I knew it had something to do with writing…and that was about it.
Because I had already learned to spend less than I made, adjusting my budget was easy. I did earn a few bucks here or there while freelancing, but it was not nearly what I was making at my full-time job.
Thanks again to my emergency fund, I didn’t have to worry about it. I had a solid 8 months of expenses covered. With a budget already in place, I knew what I would be spending would not exceed what was allowed by my bank account. Because of this safety net, I didn’t have to stress about immediately finding a new place of employment. I wasn’t so desperate for a job, so I wasn’t willing to settle for anything less than the perfect fit.
You deserve to wake up every day excited to go to work.
With an emergency fund and a budget, this can be your reality.
This session’s homework: Spend less than you make.
It may take a few months to get into the habit of living with a budget, but you’ll get there. Even if the first step is to simply spend $1 less, get your expenses under control.
It helps me to keep track of every penny I spend. I don’t follow the cash-only system (I’m too careless). Instead, I save my receipts and EVERY DAY fill my expenses into a spreadsheet. Down to the penny.
The conviction of seeing exactly where my money has gone – and what useless junk I’ve bought – is enough motivation to stay in budget.
If you don’t want to write down everything you spend, no worries! Your homework is only to spend less than you make. Form the habit now of conscious spending.
For a little extra help, I recommend reading Your Money or Your Life. I’m not exaggerating when I say it’s a game-changer.
Photo Credit: 401(k) 2012
Did you do your homework this week? Leave a comment letting me know how it went! Did you follow my spreadsheet advice? Let me know what your budget method is!
And don’t forget to subscribe!
Other posts in the series:
8 Reasons to Choose Financial Independence
8 Ways to Avoid Financial Crisis and Find Stability
Part 1 – Save Your Money and Spend Less
Part 2 – Get Out of Debt and Safely Spend
Part 3 – Independence in Any Circumstance
Part 4 – Focus on Giving, Not Earning