Want to know the secret of living a debt free life? The answer is simple: having a sound financial management plan. We talk a lot about various debt relief options on our blog, but failed to show the importance of having a good roadmap to getting out of debt.
So what’s included in this Financial Management Plan?
Many people think that a financial management plan is just creating a budgeting and sticking with it. However, there’s more to it than just budgeting. A financial management plan involves creating a plan to reduce your expenses, and clearly shows how you’re going to execute on your goals.
For example, you created a budget and decided to set aside $400/month on food/restaurants. How are you going to make sure you stick to this plan? If you create a financial road map, it would look something like this:
- Every week, I will spend $75 in groceries so I can make atleast 10 meals that I can take to work and eat at home.
- I will eat out for lunch only 3x a week, and make sure I don’t exceed $10/day on lunch.
- I will look for atleast 3 coupons I can use at the grocery stores for the items that I need to buy
- I will eat out for dinner on the weekends, but limit myself to $20.
If you create a clear roadmap to how you’re going to stick to your $400/month budget, you’re creating small goals for yourself. In order to reach your monthly goals, you have to set yourself smaller goals. If you can reach your weekly goals, then you should reach your monthly goal right?
Reward Yourself for a good Financial Behavior
I understand that this might seem like a mundane task. No one said that creating a plan and budget has to boring and tedious. I usually recommend everyone set aside any excess money they save towards entertainment. However, I do always recommend that you set aside 15% of your income towards savings accounts.
If you’re able to have any discretionary income after creating your budget, reward yourself! It’s a great way to stay focused and positive. Spend money wisely and make sure you’re taking the small victories when you can.Creating a financial management plan doesn’t have to be boring. Set small goals for yourself and treat it as a game!