The Simple Wealth

Once you have your first cash flow statement, the unplanned categorized expenses, then you can start to budget, and do the second step: cut expenses. If you don’t have your current unplanned categorized expenses, you will have no clues how to budget, that’s why budgeting don’t work for most people, because they miss the first step.

In the beginning, it’s hard. Start to focus on one thing at a time. Start from cutting small amount, 20% for example. If you are spending $300 on eating out a month, try to spend only $240 next month, which means maybe dining out once or twice less a month. Then try to spend only $200. Then try to spend only $150 until you reach your desired planned amount.

Try to change your point of view if you find yourself resistant to the idea of cutting expenses, instead of seeing yourself as someone with $50,000 or $100,000 annual income, but as someone with $1000 or $5000 whatever left on hand at the end of a year’s hard work. In such view, it then makes sense to cut down the $1000 a year you spend in coffee shop or vending machine. It doesn’t mean to deprive yourself from such little luxury. Maybe you can bring your own coffee beans and coffee grinder and make your own coffee at work. Maybe you could use that $1000 to give yourself more joy such as a trip if it does not appeal to you to save that $1000.

Try to see the bigger picture. Try not just look at the trees but the forest.

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