a person budgeting hos money

What is Financial Independence?

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I briefly touched on Financial Independence (FI) in our first post, Financial Freedom. So today, I will go into more detail on the first two parts of the route to FI. 

Tracking expenses

How much money do you spend every month? Not many people would be able to answer that question, and it is vital if you want to get on top of your finances. 

I didn’t know how much I spent in a month, like even close! And I will be honest; I still have a long way to go to get fully on top of every penny. I still feel myself getting towards the end of the month and wondering where our money has gone! Not great for someone trying to do a personal finance blog, but hey, I’m honest if nothing else! So I will be going back to my spreadsheet and starting this step again. 

Here is the spreadsheet I will be using to go through all of my household expenses.

This is from Martin Lewis’s article – Budget Planner: how to manage your money – MoneySavingExpert . I highly recommend reading through the article and using the attached spreadsheet. If anyone needs any help with using the spreadsheet, send me a message through our CONTACT page, and I will help however I can.

I must track EVERYTHING! 

  • Household bills
  • Credit cards
  • Car payments
  • Fuel
  • Hair cuts
  • Nursery fees
  • Shopping 
  • Subscriptions – Netflix, Prime, Gym, Magazines etc.
  • Clothes
  • Nights out

This may seem over the top for most people, but it’s essential to do so you know how much you spend on things. Sometimes you will be shocked at how much you spend on something you never thought about before. 

That £3 coffee for 5 days a week. Over a year of work is £780! The minuscule amounts add up over the year, so we need to know where our money goes!

Now we know how much we have going out of the door. It’s time to start making some cuts!

Making Cuts

Making cuts to your outgoings can seem impossible in some areas, but I promise you, you can do it! There is always money to save somewhere! 

Look at your bank statements and make a list of your outgoings and how much you pay each month. 

Take each item on your list and ask yourself these questions…

Can I save money on this each month? 

–      Lower rate on your mortgage

–      Change provider

–      Haggle with companies

–      Shop around – are you getting the best price?

Do I need this? 

Can I justify paying this?

Do I need it to survive?

Go through each item, ask these questions, and see how much you can save yourself in a month. You will be surprised at the results! 

Being comfortable is expensive!

Big companies take advantage of people being comfortable or lazy, they bump up your price, and you don’t think much of that extra £5 a month you give them. But that £5 per month is £60 a year, and it adds up over time! Don’t let them do it to you; know when your contracts are finishing, contact them and tell them you are looking to negotiate your new costs. You would be surprised at how much you can save. 

Don’t be scared to shop around and move companies if the price is better elsewhere! We cancelled a TV service that we were not using and saved over £600 per year! 

So that’s the first two steps towards creating the life of your dreams. Doing this will create a strong foundation for what is about to come! Thanks for reading, and keep an eye out for part 2 of What’s Financial Independence.

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