You can live anywhere you choose, eat anything you want, and do anything you wish… as long as you can pay for it.
That’s true of most people who have a job, a good income, and plenty of financial freedom. But for many, the situation is different.
They have bills to pay, kids to support, a house to maintain, an older relative to care for… the list goes on and on.
Many people are stressed out and are constantly battling to make ends meet.
In fact, 40% of U.S. adults say they are “very concerned” about paying their bills on time.
Others are scared of running out of money and having to rely on public assistance to survive.
Here are some tips for getting your finances back on track, so you can stop stressing and start living life to the fullest.
1. Focus On The Long Term.
The first step is to change your mindset.
Instead of thinking about your budget in terms of what you need to spend this month to pay your bills… begin to think about it in terms of what you will need to set aside each month to cover your recurring expenses (like rent or mortgage), plus an additional sum that will go towards your “emergency fund.”
How big should your emergency fund be? Well, that really depends on how stressed out you are and how much “financial freedom” you want to enjoy.
Personally, I have a three-month “emergency fund” that amounts to about 6-months worth of expenses. However, if I were very stressed out and had a very tight budget, I would probably only have enough money to last one month.
By the way, the average U.S. family has about three to five months’ worth of living expenses saved up in their “emergency fund.”
2. Set Aside A Little Extra Each Month To Cover “Unforeseen Expenses.”
No matter how careful you are, things will inevitably happen that are “out of your control.”
Perhaps your car needs to be repaired. Or your furnace may need to be replaced. Or your child may get sick and require medical treatment that was not planned for. The list goes on and on. When these kinds of expenses pop up, it’s important to remember a few things:
A. There is no way to predict when (or even if) something like this will happen… so you should always have a little bit of extra money handy to cover such expenses. After all, you can never be too careful.
B. By the way, I don’t mean set aside money to pay for these kinds of expenses in advance. That could actually make the situation worse… because then you will be starting with an empty “slate.” Instead, the idea is to have enough money to pay for these kinds of expenses as they arise.
This brings me to my next point…
3. Pay All Your Bills On Time!
This seems like a no-brainer… but many people don’t do it. Why? Because it’s boring and feels like “work.”
However, if you really want to achieve true financial freedom, this is one of the most important things you can do. Why? Simply because… It Is The Single-Most Important Financial Habit You Can Develop!
Here’s why: As I mentioned earlier, 40% of U.S. adults say they are very concerned about paying their bills on time.
But here’s something interesting: Only 20% of those same adults say they are very concerned about saving money! Why is that? I think it’s because most people equate “saving money” with “being frugal.”
But being frugal is only a part of the equation. The other part is… you also have to be disciplined!
Saving money simply means not spending more than you take in… unless you really want to (in which case, you would pay for it in some way that does not involve throwing money away).
Final thoughts on budgeting with less than $1000 per month
As you can see, even with a very tight budget, you can still have a very nice life. However, you will have to be a lot more disciplined than if you had a much higher budget.
Also, it’s important to remember that a lot of times, the “discipline” required to save a little bit each month… is much more “fun” and “enjoyable” than the discipline required to spend all your money… and then some!