The secret to financial success is not making more. I know what you are thinking: ‘Well, if I had a million dollars I would be in a much better situation.’ My question to you is, what would you do with a million dollars? My next question is, what do you do with a thousand dollars or a hundred dollars? If you can’t control what you do with the money you have now, you won’t be able to control more money. Here are the secrets to financial success.’
Focus on Spending, Not Income
Sometimes we focus so much on the money coming in that we ignore the money going out. We can be so focused on income that we ignore the bigger culprit – spending. When we switched from two incomes to one, I was forced to focus on spending because I wasn’t contributing an income anymore. I quickly saw that income wasn’t the problem. It was our spending. We were spending almost all of our income and putting nothing towards savings. That’s when I realized: we didn’t have to make more to save more; we had to spend less to save more. How do you spend less? You start by tracking your spending.
Track Your Spending
If you take a careful look at your spending, you will realize there are areas where you can spend less. Numbers never lie. I had no idea we were spending as much as we were until I saw the numbers. Tracking your spending can be as simple as keeping a notepad in your purse and writing down every purchase you make. If you use a debit card, most banks allow you to track your monthly expenses through online banking. America First Credit Union has a Money Manager option online that allows you to track spending, set budget amounts, and visualize in a pie chart where your money is being spent. Whichever way you do it is fine, just as long as you track your spending. Ideally, you will track it for 3 months so you can see trends in spending, but start out with tracking your spending for one month. I promise you it will be worth it.
Find Small Ticket Items
My husband and I looked at each expense category through the money manager tool offered through America First Credit Union. What we found shocked us. We were looking for a handful of BIG expenses that would explain where our money had gone: a trip, a furniture piece, or even a shopping spree. Instead, we found LITTLE ‘small ticket’ expenses: purchases no more than $10-$15, but there were a lot of them. The biggest expense for us? Food. We realized that we didn’t have an income problem- we had a spending problem. Not a spending problem on large, expensive items, but on small expenses that added up. We learned that we were spending money on things we didn’t need or value at the expense of the things we wanted most- increasing our savings fund for a growing family.
Choose Your Success
As a society, we tend to see wealth or financial success in terms of material wealth. For example, if someone owns an expensive home they have achieved financial success. If someone goes on vacation frequently then to us they have achieved financial success. The truth is, it all depends on how we define financial success. For my husband and me, we choose not to travel. Instead of spending money on vacations, we choose to spend that money on funding our hobbies which happen to be blogging and writing. For us, being able to fund hobbies is a form of financial success. Another form of financial success for us is being able to pay off our house early. Others may determine that financial success is traveling the world. How you define your financial success will determine how you allocate your funds.
Allocate Your Money
Next time you see your neighbors buying fancy toys, rather than assume they are rich, think that they are allocating their money differently than you. Because they choose to buy fancy toys for entertainment, they choose to cut back in other areas. If you want to travel, then you sacrifice other areas in your budget to allocate more funds to travel. This will change the entire way you view people and their wealth. It also gets rid of the misassumptions that because someone is wealthy in one area of their life it means they are wealthy in all aspects of their life. They simply choose to allocate their money differently than you to match their priorities. When it comes down to it, the secret to financial success is not making more money. It is allocating your money to your priorities and learning how to cut back in other areas.
The million-dollar tip is learning to spend less and save more. It is learning to manage the money you already have instead of trying to manage how to make more. With this tip, you can improve your financial situation no matter what your income may be.
