We generation Y’ers live in a period of excesses, relatively high standards of living and want everything NOW. Technology has been the single biggest enabler in allowing us to live in comfort, sometimes to a point where we take things for granted, even becoming wasteful. I am guilty of this very fact. I used to replace my completely functional mobile device every year because I wanted the newest and best. Or I used to pay retail prices at local shops for items because I wanted it now, instead of waiting 2 weeks and saving 50%.
Part of that wastefulness was due to the fact that my expenditures were recorded in the air and were forgotten as soon as I handed over the money. This lack of awareness and accountability entitled me to go on endless spending sprees without a second thought. However, after having my expenditures arranged in a structured form, it dawned on me how much money was wasted on ‘unnecessary’ items and how I paid more than I had to for items. As I started to record my expenditures and have them on paper in front of me, it become real. Suddenly I saw the barrier that was preventing me from achieving my financial goals.
Hopefully you have had enough time to think about your expenditures in Part #1, enough time to implement some of the changes detailed in Part #2 and not found it too difficult to adjust. Now that you have worked out where you could save some money and still lead an exciting life, it is time to put your hard work into good use.
Allocating an amount to each expenditure item
Remember the equation is Savings/(Debts) = Income – Expenditures. A change in one variable means a change in another, that is an increase in savings will result from either an increase in income, or a decrease in expenditure.
You already know how much you are spending in each sub-bucket from your exercise detailed in the last post. Now total up your income received for the month, and allocate a portion of it to each of your expenditure sub-buckets: Must-haves, Semi-haves and Hardly-haves. Because you have lived a normal lifestyle while filling your buckets, your income allocation will be fairly accurate because you know how much is needed for each expenditure.
The easiest way to do this is use to a spreadsheet to complete this exercise, listing the items side-by-side with an extra column showing the difference between your allocated income and your actual expenditures.
I have included a download-able example that is a working spreadsheet of the above.
Tracking your progress
How does your over/under column look like? Have you got more reds than black, or vice versa? Remember that your document is of a dynamic nature, and can change if circumstances changes. In fact, it should change frequently so that it remains relevant to your situation at all times.
Remember the reason that drove you to go through this exercise in the first place? How it was always impossible to know how long it would take for you to achieve that goal? What you have now in your savings/(debts) amount is a quantified monthly progress meter that allows you to determine how far you are from achieving your goal.
For example, your goal is to buy a TV for $2,000. Every monthly cycle, if you have quantified your savings amount to be $1,150, it will then take you 1 month 3 weeks to save up enough money to purchase that TV. Likewise, if you have a (debts) amount instead, you will know that you are getting further from your goal.
Old habits die hard
This tool is not meant to solve all your financial problems. What it provides is a easy-to-maintain monthly indicator to put you on the right path to achieve your financial goals.
We are all creatures of habits. Habits are subconscious actions that doesn’t require much effort to action, something you can do with your eyes closed, literally. Consider when you catch your usual train, you walk into the same entrance, along the same path, and will always know where to look for your train times and boarding platforms. Or when you turn to your smartphone, knowing where every single icon is and swiping the screen too fast for the screen to register. Doesn’t take much effort does it?
When you get into the habit of knowing what to look out for in managing your bucket items, it will too be effortless in maintaining your monthly expenditures. Once the tool is up and running and setup just the way you like it, it will take up less than 2 hours (tops) a month to track your progress.
There you have it, a way to easily record your income and expenditures, imaginative ways to save money in your everyday expenditures, and a tool to keep track of your progress towards that goal.
Remember to take it slow, enjoy the challenge of identifying new ways to achieve your desired lifestyle, and reward yourself along the way. Continuously remind yourself that it is OK to fail, it is OK not to meet your monthly targets. Trying is the half the battle won, and you will never fail to learn something on the way through.
Believe it, because you are on your way to building yourself a mountain.