Home Budget – How to Live Within Your Means

Spending a little time creating a home budget will help you live within your means and live a better life. Unfortunately few families view this as an important part of their lives – those same families are finding it more and more difficult to make ends meet.

I read lots of experts that recommend that you track every penny that you spend, that you develop a budget that has 50, or 60, or more categories for everything from postage to pasta, from envelopes to electricity.

I don’t know about you but that seems like an awful lot of work to me! I tried this method back in my 20’s but could never stick to it, I found it wasn’t any fun and was overkill.

A am a big believer in home budgeting, you can’t improve what you can’t measure is a business axiom that I think fits when it comes to using a budget to improve your personal finances.

Here are some tips to help you with your budgeting:

Keep it simple: Start out by creating a budget uses a dozen or so main categories that fit your lifestyle and that you want to understand where your money is going. By starting simple you can build the habits you need to succeed, and begin the process of learning.

Make it fun: Let’s be real…for most of us tracking where our money goes is not very exciting. I found that finding ways to make the process fun helps me stay on track, and provides incentive to continue. Try rewarding yourself for accomplishing a certain goal, or look for creative ways to reduce your spending.

Make it meaningful. This is your money we are talking about, your life. Simply because someone recommends you budget for electricity does not mean you have to or should. Electricity might be a very small portion of your monthly expenses because of the part of the country you live in or your lifestyle. Why spend the time and energy tracking a small item when you are spending $300.00 a month on a coffee habit.

Make change. A budget is a plan. It is a road map for getting from where you are to where you want to go. It is meant to change, and you need to accept this fact. If something is not working, or you need to create more detail…then do it. Develop a process and routine that works for you, and then continue to review what is working for you and what isn’t…then make the necessary adjustments.

Budgeting requires that you take personal responsibility for your finances and that you are disciplined. Like anything that is new, it takes time to learn. If this is your first budget it will probably be a mess, that is ok…it is supposed to be. Allow yourself to make mistakes, make changes from what your learn and get a little better the next time. With home budgeting, in a years time you will not only have more knowledge about the process of budgeting but you will also have more money in the bank as a result of living within your means.

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What Everyone Should Know About Achieving Financial Freedom

I believe that achieving financial freedom is possible for everyone! And in many cases I believe that many of us could find financial freedom tomorrow!

Do you believe me?

Why or why not?

It did not say that you could be “rich” by tomorrow, or that you could retire tomorrow, or that you would be making millions of dollars a year, or that your net worth would mysteriously shoot to stratospheric levels.

No, what I said was I believe that many of us could find financial freedom tomorrow!

The first place to start is to determine what financial freedom means to you.  This seems like a logical place to begin, actually defining what the term means.  With this definition we can then compare our circumstance to see if we have achieved financial freedom yet, and/or figure out what steps we need to take to achieve it.

I don’t think many of us spend the time to actually think about what financial freedom means to us…let alone develop our personal definition.  I know I didn’t for many, many years.  I only had a vague idea of what I was after.  In my case the vague idea was a specific dollar amount based upon the financial spreadsheets and personal finance budgets I maintained for my family.

However, while I had a specific dollar figure…that kept changing based upon my increased success by the way, I had not considered most of the other aspects of my life.

For example, if I wanted $1,000,000.00 in the bank…if this was what I needed for financial freedom this was only true for a limited set of assumptions.  What if I wanted to live in a “Mansion”, with a butler, and maids, and a chef…and throw in a driver while we are at it, well I probably would need much more than a million bucks for this lifestyle.

In contrast, what if I wanted to live in small town USA somewhere in the middle of the country, would I still need $1 million?  For this example lets assume the answer is NO.  So I could actually achieve “financial freedom” a lot sooner than I anticipated and would need less than a cool million.

Let’s try this example…the majority of financial “experts” and personal finance models say that you need 80% of your current income when you retire.

Says who !!

If we take these messages as facts it will have a profound impact on when we retire and when we achieve “financial freedom”.  It took me many years to see the mistake I was making by using the financial models without question.  Each time I received a promotion and made more money, the amount of income I needed in retirement increased as well.

It went from 80% of $1,000 or $800, to 80% of $2,000 or $1,600.  Every time I became “more successful” financial freedom became more elusive.

Finally I began spending some time thinking about what the “financial experts” were saying, and what financial freedom meant to me.  I knew the amount of money I was putting out to maintain our home, there was a cost to our beautiful 3,500 sq. foot home that I knew first hand because of the home budget we maintained.  I also knew that there was NO WAY I needed this size house after the kids were gone (could easily be argued that I did not need it now), and that moving to a smaller home would significantly reduce our expenses.  I would now need less money to achieve financial freedom!

Hopefully, you get my point.  Financial freedom is a personal choice and there is not a one size fits all formula or advice that will work.

Our current lifestyle involves a lot of travel.  Over the past year I have researched and read about a lot of people that spend most of their year traveling.  Many of these couples and families spend less than $25,000 a year to maintain their lifestyle.  My guess is that if you ask these folks whether they have achieved financial freedom the answer would be yes.

They don’t need all of the possessions, all of the consumer goods, and all of the “normal” trappings of western society to make their lives whole.  They live exciting, adventurous, fun, and balanced lives, but choose to spend their time, energy, and money in other areas.

I do not assume to think that this lifestyle is for everyone, my point is that you need to spend the time thinking about it and developing your own personal definition of financial freedom.  You may come to realize that with only a few small changes, or in our case one large change, you can achieve financial freedom.