“Controlling and managing your spending is a skill that takes practice, determination and discipline.”

One of the most important things you must learn and understand in financial planning is that every dollar must have a job, whether you intentionally give it one or not. It is best to assign a task to every dollar you earn. When every dollar has a predetermined destination and income minus spend equals zero, you have created a zero-balance budget; this is the goal.

If the idea of maintaining a budget seems unpalatable, start small. Begin by tracking your monthly expenses and spending habits.  You need to have a clear picture of where your money is going before you can change anything.

Become the boss of your paycheck and cash

Start assigning a job for every dollar you have with the intent of ensuring that money is your servant and working for you. You need to direct it to the things that move you forward, the things that allow you to live the kind of life you envision for yourself. You need to determine where your money goes, you need to take control.  Here are some examples, according to Joe Morgan, financial advisor, Best Financial Life:

• Your home equity dollars provide a place to live and the safety that your home value won’t fall below your mortgage (assuming you have enough of them)
• Your emergency fund sits like the fireman in the station, ready to help you through life’s next big challenge
• Your living expenses, which are funded by your paychecks, ensure your current lifestyle is maintained throughout the year
• Your savings cover any big purchases over the next five years that cannot be funded by your regular pay
• Your investment portfolio takes care of expenses that are five or more years in the future, which won’t be covered by future income
• Your “play money” investment account is for entertainment purposes, but only if you know you won’t get rich (or go broke) buying and selling individual stocks.

Give Every Dollar a Name

Intentional Mindset

Personal finance podcaster, Paula Pant, says, “You can afford anything, just not everything.” Intentional living is not about deprivation or sacrificing the things you enjoy, but investing and spending on the things that are valuable to you.

Adopting an intentional mindset around where and how you spend your money will help control cash flow and free up more money to save and invest. For example, if quality food and nice meals are where you find value, you could focus on spending in that category, but you may need to pull back in another.

It’s important to understand that building the life you deserve isn’t about owning luxury brands or having the biggest house. It’s about finding the things that aligns with your personal values and the vision for your life and that bring you purpose, fulfillment, and joy, while balancing the cost versus value in the choices you make.

Your time is ultimately one of your greatest assets. As Warren Buffett says, “If you don’t learn to make money while you sleep, you will work until you die.” A big part of your financial journey will be finding ways to make your money work for you, taking steps like investing in low-cost index funds.

When it comes to spending, being intentional by giving every dollar a job and intentionally search for the best value can make a big difference to your cash flow and personal financial bottom line.

References:

1. https://financialaid.syr.edu/financialliteracy/financial-basics/every-dollar/
2. https://bestfinlife.com/give-a-job-to-every-dollar-you-have/
3. https://www.cnbc.com/2021/02/12/sisters-who-went-from-financially-insecure-to-6-figure-net-worths-top-money-tips.html
4. http://www.orangecoastcollege.edu/student_services/financial_aid/wellness/Pages/dollarajob.aspx

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