Forecast Your Spending – Part 3
We are on to part 3 of how to control your spending completely. We have already learned how to Review our spending, then to Track it properly; now, we need to learn how to forecast what we are going to spend our money on before we ever spend it. This will give us the ultimate control over our spending.
Forecasting your spending simply means to sit down at the end of the month to plan out where each dollar is going to be spent in the coming month, meaning in which categories are you going to spend each dollar you earn? If you sit down on the 30th of the month and plan out for the next month, you will be able to calculate and predict accurately, from the data you already have in your reviewing and tracking, how much you are going to spend in each category. Be careful that you review and set a spending amount for each category. Many of your categories will be the same or close to the same amounts each month, but others will change. In the summertime there are more weddings so your gift category may go up; you may be expecting a car repair or an oil change that doesn’t happen each month; you might need dental work or some other expense that doesn’t recur each month, so plan those out.
Once you have given each dollar a job and allocated for them into categories you are ready to control your spending!
One note that is crucial to your success: one of your spending categories should be savings. If you treat savings as an expense that is fixed, you will move forward and be able to retire comfortably and choose when you work. In this economy many are tempted to give themselves an excuse to not save, claiming they can’t save or the bills won’t get paid. But remember this, it is all about PRIORITIES. If you prioritize savings as a fixed expense, you will save, no excuses. We have coached thousands of clients, and THERE IS NO EXCEPTION, every family can save money every month, if they prioritize it as a fixed expense and DECIDE to do it. This might require some sacrifices, albeit minor, but once it becomes a habit it becomes addicting and you learn to save more. I CHALLENGE YOU, save every month! You should be up to where you save 15% of your income each month; if you feel you can’t do that, start lower, but start now!
Here’s something to whet your whistle about savings. If you saved $300 a month (remember, our national average of savings are learning to RaTiFy your spending is $312 a month) for 30 years at a 6% interest (very doable), you would have $302,861.29 at the end of those 30 years! Does that give you some perspective? If you are 35 and start now, that’s an awesome way to augment your retirement! Done right, this could be saved tax-free, but we’ll address that in another post. If you simply add 10 years to that, starting at 25, it ends up being $600,434.46! Get going!
Excellent, we now know how to control our spending and why you should do it. The question is, will you do it? Yes! Your neighbors are doing it, your friends, your family are doing it, you can too! Controlling your spending is the mechanism to give you the freedom in later years to enjoy life comfortably. There is a quote that is attributed to Zig Ziglar, Robert Allen and many others, and it goes like this: the chief cause of failure and unhappiness is giving up what you want most for what you want in that moment. Live by that principle with your spending, set long term goals and go out and make a better life for yourself!
Remember, RaTiFy your spending!
- Review your spending
- Track your spending
- Forecast your spending