Smart Living Rule 6 – Get The Most Out Of Your Money
Are you getting the most out of your money?
Money is the fuel of life. No matter how much or how little you earn, no matter how much or how little you need to live your chosen lifestyle, getting the most of out of your money is smart living.
It takes money to do just about anything. Good financial management will give you more options and freedom to live the life of your choice. This is living life to the fullest!
3 smart living techniques for getting the most out of your money
Getting control of your money to make it do what you want is not all that hard. In fact, it is amazingly simple, yet not always easy to do.
Winning with money is 80% behavior and 20% head knowledge. You do not have to be a financial guru which is good news for me. However, you do have to decide to reel in your bad money habits which can be a difficult thing to do.
Dave Ramsey says, “You have to get sick and tired of being sick and tired” before you’re going to choose to change. I believe this is true.
If you are fed up with barely getting by one month to the next, then you might be ready to implement what I believe are the three most important techniques for getting the most out of your money.
1. Get control of your money with a budget
You have got to be willing to get control of your money to get the most out of it. A budget is not a hammer used to bang yourself and your family over the head for bad behavior. It is a tool that allows you to align your spending with your family’s priorities.
A good budgeting system tells your money what you want it to do in advance every month. It focuses your resources toward the goals that you set. The key is to get everyone to agree to the plan up front to avoid conflicts.
Another purpose of a budget is to help you start spending less than you earn. You cannot live life to the fullest while you are buried in debt, but we’ll talk more about that in a moment.
A budgeting system will help you plan for the expected and the unexpected expenses of life. It gives you a way to start saving money for specific purposes like Christmas presents, a college education, a busted water heater and car repairs.
Finally, a budget provides you a feedback loop to let you know whether you are actually spending according to your plan. This is indispensable. This ongoing process will whip your finances into shape in no time!
2. Get out of debt to give yourself more freedom
I am a firm believer in living without debt. I know some people feel differently, but this is the choice my wife and I have made for our family. We think it is smart living. Let me explain why we feel this way.
First, by being debt-free, we have reduced our risk. If we lost our income unexpectedly for any reason, we could still survive for several months because our monthly expenses are relatively low.
With the monthly payments that come with debt, many people are spending every dime they earn and would soon be in big financial trouble should they experience even a significant reduction in income. It happens way too frequently!
Second, we believe that the borrower is slave to the lender. Less debt means fewer commitments. This opens us up to the opportunities life presents us.
Freedom from debt has created margin in our finances. We have money to give and to help others. We can also use the power of cash to get some really great deals!
Overall, a debt-free life is just simpler and cleaner. It offers a higher quality of life with less stress and more freedom which in our opinion is smart living!
3. Get started investing so your money can work for you
Once you are living on a budget and have paid off your debt, then it is time to start investing so your money can grow. This is the way to build wealth and prepare for the future.
Investing wisely means putting your money in long-term investments that have a solid track record of success. There are many reasons to do this, but let me mention a couple of the bigger reasons here.
First, someday you are going to want to do things that require big piles of cash. I’m mainly talking about things like sending one or more kids to college and retiring from full-time work. The only way to do these things with dignity and without accumulating more debt is by investing wisely.
Second, getting your money working for you magnifies and perpetuates your financial success. The sooner you begin, the bigger and better your nest egg will be. This means the sooner you’ll be able to shed things holding you back from living life to the fullest!
Investing is a fundamental practice for getting the most out of your money!
Assignments: Start getting the most out of your money
“The best time to plant a tree is twenty years ago. The second best time is now.”
~ African Proverb
Again, starting to get the most out of your money is pretty simple. It just takes a little effort on your part. If you’ll do these things, then I think you’ll be amazed at how fast it all begins to improve your life.
Here are the assignments for this rule to help you get started:
- Believe it is possible – The first thing to do is convince yourself that it is possible for you to live on a budget, pay off your debt and start investing. This is likely the biggest hurdle you have to overcome. It was for me, but now I am living testimony that it works. The best suggestion I have for you in this regard is to start listening to Dave Ramsey’s radio show. You will hear great advice and you’ll also be encouraged by the stories of those that are winning with money!
- Start your budget – I believe the best method for budgeting your money is the envelope system. I highly recommend purchasing YNAB Pro to help you get organized. I also offer you the following articles for more information on how to get started with your budget.
Things I Learned Living on a Budget – Part 1, Part 2 & Part 3
Back To Basics- 79+ Brilliant Budgeting Resources You’ll Love
How To Avoid Buying Things You Do Not Need!
- Begin paying off your debt – Many people have successfully used the debt snowball technique to pay off their debt. This is the best method that I have run across. It works much faster than you think. My wife and I paid off $28,000 in debt in about 20 months! My article Getting Debt-Free Using The Debt Snowball Technique explains exactly how to set up and manage your debt snowball.
Smart living requires you to get the most out of your money
Using your money wisely will help you live life to the fullest! It will relieve you of a lot of stress and give you so much more freedom to do the things you really enjoy! This is truly a big step toward smart living.
Follow this link to discover all the rules for Smart Living.
Photo by Jbangelo
Investing money is one of the most important things that anyone can do – if you save as little as $10 a month from the age 20 by the time you retire, because of compound interest you will have over a million dollars
Faramarz – Anxious Candy´s last blog ..Hyperventilation and Successful Breathing
You know, I read this post and then, as I read your assignment, I froze. To believe it is possible that I can get a hold of this thing is tough, to be honest. This is hard, but I suppose hard is good as it will build my character. Fun times!
Dan´s last blog ..Need help Preparing for the Gala!
@Faramarz – I think maybe you meant if you save $100 per month. By my calculations, if at 20 you start putting $100 per month back for 45 years (assuming you retire at 65) at a 10% rate of return, then you’ll have $1 million at retirement! Is this right or did I miss something?
@Dan – I believe it is 100% possible for anyone to succeed with money. It just takes a little discipline. Good luck!
Thanks for your comments!
Thanks for this post Jeff. Good money habits is the first step towards getting out of debt, having more money in one’s life, and having personal freedom. Bad money habits drive a person more debt, lose more money, and constrict oneself of personal freedom. Like you said, we can analyze the way we spend money by having a good budgeting system.
I like how you mention getting control as #1. If you don’t then you will fail. Realize the issue you have and when you accept it, then you can begin planning, controlling and budgeting.