Budgeting and planning lead to financial freedom!

Not many people like the idea of being “on a budget”; we’d all prefer to spend our money spontaneously. But planning and budgeting are some of the easiest things we can do to help ensure our hard-earned money gets used on the things that give us the most joy.

TFO Phoenix employee Tabitha Daly would love to go back and tell her teenage self that “bad habits take time to break, and good habits take time to build.” Getting in the habit of budgeting at a point in life when it isn’t critical will make it easier later when you might have to count every penny. When Tabitha got her first part-time job, she was excited to have her own money and even more excited to have the freedom to spend it the way she wanted. Budgeting wasn’t necessary because she didn’t have many expenses at the time. However, once she got to college and had to pay for school, money became much tighter. It was a significant adjustment for her to have to go from freely spending every dollar to a “track every penny” budget. Today, she feels if she had developed disciplined planning and budgeting habits earlier in life, she would have had a far less stressful financial experience during college.

Tabitha’s point is an important one to understand. When you are living under your parents’ roof, you don’t have nearly as many required expenses. But as you become more independent, finances begin to get complicated. If you develop planning habits early on, budgeting to help use your money wisely will feel far easier.

TFO Phoenix employee David Bloom also came to realize the importance of having a “game plan” for his money. Early in his professional life, he started to incur larger lifestyle expenses, such as rent, car payments, and travel, without having a plan or truly knowing his budget. These larger expenditures ultimately led to credit card debt, little savings, and a lot of anxiety about his finances. If he could go back in time, he would use a simplified budget to better understand what he could afford and what he could not. Putting a proper budget into action would have helped him prioritize and develop a plan for future expenses, such as travel, without incurring additional debt and the related interest costs and stress that go along with it.

If someone gave you $800, what would you do with it? How much rent might that cover? Could it make for a nice addition to your travel fund? A year ago, I reviewed my own spending habits and quickly I realized I was spending an average of $1,139 annually at local coffee shops over the past few years. And that did not include the occasional breakfast sandwich. While I love my gourmet coffee, I realized this was one area where I could make an impactful change in my own budget. I bought a Keurig machine and now I spend less than $1.50 for 2 cups of coffee per day. While I admit I occasionally miss my Cinnamon Dolce Latte, I’m excited about having the extra $850 to spend each year on other things!

Today, there are plenty of technological tools such as Mint, PocketGuard and You Need a Budget that can make budgeting and tracking easy. Whatever approach you decide to take, having a plan for how you spend your hard-earned money will help you make better decisions and put you on a path to achieve financial freedom.