Mastering Your Daily Finances: A Guide to Budgeting for Financial Freedom

In today’s society, we’re often encouraged to adopt a “buy now, pay later” mentality, perpetuating a cycle where our choices benefit others rather than ourselves. Take, for instance, the staggering profits of luxury brands like Louis Vuitton during the 2020-2021 pandemic. While some used stimulus funds to invest or save, many indulged in spending, highlighting the disparity between appearing rich and achieving genuine wealth.

In this article, my aim is to help recalibrate your financial mindset, offering a jumpstart to hold yourself accountable and navigate future financial decisions.

Let’s address some fundamental concepts and rules that I like to apply when it comes to how we view our daily spending:

1. Avoid Financing Non-Productive Assets: Never finance anything that won’t generate returns for you.

2. Redefining Budgeting: Budgeting doesn’t have to be daunting. There’s a simpler and more proactive approach that yields effective results.

3. Maintain Open-mindedness: Before delving into the content ahead, define your primary budgeting goal and keep an open mind for new approaches of how to solve an old problem!

Your Money Flows

Imagine your financial life as a chaotic jumble of expenses and credit card debts. Traditional budgeting often fails in such scenarios due to its reactionary nature. Instead, consider setting up three distinct accounts: fixed, flexible, and future. In doing so, you are creating a physical separation of your expenses. This will allow you to manage and monitor your expenses in real time.

1) Fixed Account: This account deals with recurring, predictable expenses. Use resources like your MyPath dashboard or Google sheets to organize your fixed expenses effectively. Your homework begins here! Once you’ve compiled a list of your fixed expenses, you can then move onto the next assignment below!

2) Flexible Account: Your second account is the one where you’re able to get strategic about your expenses. Here you’ll be monitoring the expenses you incur often but also vary in cost and frequency depending on life circumstances. Examples in this account may look like restaurants or entertainment. The flexible account allows for proactive, real-time planning, potentially leading to automation (I’ll save that for a future article!!). By having another account or credit card specifically for these expenses, it will help keep you connected to your spending habits. Be sure to revisit your budgeting app, MyPath dashboard or Google sheets to foster accountability.

3) Future Piles: Escrowing for larger, one-off expenses like insurance or savings for significant purchases requires foresight and planning. By allocating funds to separate savings accounts, you gain tangible separation and better financial control. In our household, this is a monthly goal where we fund accounts for future purposes.

Mastering your daily finances necessitates a shift from reactive to proactive financial management. This also looks like a lot of hard work that most people don’t have the time for OR they just simply don’t enjoy looking at their finances. However, I’ve often shared with clients that the numbers don’t lie. If we avoid looking at them, they are still there! Instead, let’s embrace our spending habits and create awareness around our budget. This is one of the first steps towards financial freedom and empowerment.