Balance is the sweet spot where what you want meshes with what you need, and can (or should) have. Finding financial balance can be tricky because the immediate gratification of spending money can be more attractive than the long-term benefits of being financially responsible. The trick is to find a balance that allows you the freedom to enjoy your present while having—and working towards—financial goals for your future. Here are some tips that can help you find a financial balance that works for you.
1. Understand Your Financial Situation
Financial experts agree that budgeting is the starting point for achieving financial balance. A budget helps you understand how much money you have and plan how you will spend it. By setting up a budget, you avoid problems because you know what you can and cannot afford.
Finding the right budgeting technique for you can take some trial and error. It’s a personal preference and you may have to try a few different options before you find the right fit. It may be a notebook, a spreadsheet on your computer, an app … whatever ensures you keep track of your expenses and income is the right choice for you.
2. Find Your Spend/Save Balance
Working towards your financial goals shouldn’t mean you can’t enjoy life. Depriving yourself completely isn’t realistic because it can’t be maintained. The key is to find a reasonable amount that you can spend on things that give you pleasure that will still allow you to meet your financial goals. That’s your balance point.
To do this you need to look at your budget and cut back on things you don’t care about so that you have the money to spend on things you do care about. Here’s how to get started:
- Identify your essential expenses, the things you must account for in your spending. These are typically housing, food, transportation, insurance, loan payments, etc.
- Identify your non-essentials
- Prioritize your non-essentials in order of most to least importance. Do you like to travel? Watch movies or go to the theater? Eat out? Can’t do without your expensive coffee-shop cappuccinos?
- Identify non-essentials you can sacrifice for your priorities by either not spending money on them or finding cheaper ways to do them. Can you buy a bag of your coffee store beans in the grocery store? Watch movies online instead of in the theater? Go out to eat once a month instead of twice a week?
- Determine what your budget is for your “pleasure fund” and optimize it for items that were high priorities for you.
You may have some trial and error before you hit your “sweet spot” and have to make some adjustments as you go. That’s okay as long as you are keeping to your overall budget.
3. Keep Your Goals in Mind
Living for today rather than saving for tomorrow can be tempting. Stick with it. Celebrate your milestones when you reach a goal-like saving a certain amount or paying off a credit card or other loan. Reward yourself. And remember that there are even bigger rewards in your future financial goals, including financial flexibility, options, and freedom.