Frugal Strategies

Ok, so you want to get out of debt, or perhaps you want to build up a healthy savings reserve or even better yet, you want to gain financial freedom rapidly. A key ingredient to achieve any of these is to have a solid plan in place that contains key strategies to help you achieve your overall goals. Here are some tips from the Frugal Prof, to make your money saving goals for 2016 a reality:

1. Make your goals and find your why.

What are your longer-term goals? Do you want to get out of debt, do you want to stop living month to month? Do you have an aim of retiring within 10 years? Do you want your house paid off in five? Do you want to reach million dollars in your 401K in a couple of years? Where do you want to be next year, in five years and then in ten years? Get your larger goal written down so that you have something to aim for, and if you really to make this goal, then you will also have to find your reason why. What’s driving you, perhaps you’ve had enough of the 9-5, and so want to save up and invest as much as possible to escape the rat race. May be you want to spend more time with your kids, or your grand kids. It’s your reason why that is really going to help you stick to your goals.

2. Take time to sit down and create that overall plan.

OK, so now you have your larger term goal, you’ll have to figure out how to achieve this for this year? What is your plan for the month? What is your plan for the week? Don’t go wandering aimlessly through the year, make time to create this plan, and see just how much money you can save. Remember that ‘a failure to plan is a plan for failure’. I would suggest to keep it simple, an excel spreadsheet should do the trick, and you can get help from Mint or Personal Capital to see your previous spending levels, what is realistic to cut back on, i.e. your wants, and what is already at a good level, which is hopefully your needs!

3. Make it a family plan.

The best plan is when everyone invested and involved. Perhaps you can make it a nice occasion with a delicious home cooked meal, and take the time to sit down to discuss and work through your spending and savings priorities for the year. What are the needs that have to be spent on throughout the year? Work out how much you can safely reduce from the family expenses, even the needs. Probably the biggest expense is the mortgage, and can you get a lower rate with a refi?

Do you have any car payments, and what car do you have, perhaps you can sell an expensive car, such as a BMW or large SUV and get a Prius instead. You’ll likely half your fuel expenses, due to now driving a 50 mpg Prius verses a 30mpg BMW that runs on premium fuel and that is probably a lot more expensive to repair. What other needs are there? Insurance? Again, it’s a good time to shop for new rates. Once the needs are taken care of then it’s time to switch to your savings and investment plan. What are your key objectives here? Is it 401K, real estate investing, or getting your small business off the ground, and how much of your budget do you have left after your needs have been met to invest into these areas? Is it 10%, 30% or hopefully you can get up to the 50% and higher ranges?

4. Make it a yearly plan, a quarterly plan and a monthly plan all in one.

As we know at Frugal Prof, focusing on your needs over your wants is a key way to rapidly gain financial freedom, but it clearly requires dedication and thus creating the plan for the entire year really helps keep you on track. You can start this plan at any time, though most people I would suspect will do so in the New Year. Map out your expenses for the year, and then agree to have a quick look at the end of every month to make sure that you are sticking to the plan, or how you should adjust to some unforeseen circumstances, where your budget should allow for minor unforeseen expenses throughout the year.

5. Ignore the Joneses.

Don’t let your plan get crushed by the Joneses, as trying to keep up with them will surely stretch your budget too far. Remember the majority of fancy cars are financed and McMansions have a large mortgage with a small down payment, rather than being paid for through cash-flowing assets. Following the Joneses is a sure fire way of being stuck in the rat race, and perhaps even never retiring!

6. No Excuses Please!

Take responsibility to previous mistakes and get your plan up and running for the New Year. As we all know, that when push comes to shove it’s best not to blame others, and accept it is not the employer’s fault, it’s not societies fault, but it’s all down to you, so good luck and best wishes for the new year!