Keeping the balance between saving and spending money

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It’s not always easy to save a bit of money every month. Especially when having high costs of living, lots of bills and other unforeseen costs leaving you with only an insignificant small amount of cash leftover. Some may ask, why bother to save at all? Although some have more difficulties than others, a lot has to do with how you spend your money.

All too often we forget were we actually spend our money on. By improving the balance between spending and saving, anyone can have some extra cash at hand to use for savings, paying down debt or investing.

We unknowingly spend a lot of money on things we don’t really need. And don’t even know where our money is going. By tracking every cent, you can easily learn where the money is going to. By changing your behavior and make big or even small improvements, will eventually get you to a point which will change your life as well.

The big change

About 2 years ago we started with investing in stocks and it took as 1 whole year before we hopped on the financial independence train. Quite soon we noticed that if we really wanted to be FI one day, we had to watch our money, big time.

Around the same time we started investing, we also bought a house.  Back then we had a choice between spending all our savings for renovation and new furniture. Or only do the things that are necessary then, and postpone the rest. We chose for the latter. The result was that we still managed to invest around 8000 euro that same year into stocks. The downside though, is that we only recently made an office from a room that was empty for 2 years. With the money we saved then, we started our own portfolio and building up to the wealth we need to be FI.

Keeping the balance

The decision we made when we bought our house, set the path to a new vision on how to deal with money. We carried this thought through with all the things that required money. Like doing groceries. Instead of buying everything we wanted or needed, we set a monthly budget. We had to balance between what we wanted vs. what we wanted to pay for it.

The same goes for clothing. Instead of going to the stores every month. We go a few times per year (we especially like sales periods) and buy the things we need in 1 shopping session. We carefully choose when and where to spend our money.

By keeping an eye on our spendings, we successfully manage to save well over 1250 euro every single month. By doing this we grow our portfolio step by step.

The one guideline we follow in order to save enough money, is a famous quote said by Warren Buffet:

Do not save what is left after spending, but spend what is left after saving.

Set a budget for saving as well

The most important tip for saving money is to set a budget. Decide how much you want to save every month. And as soon as your paycheck comes in, put away that same amount of money into your savings account. And then leave it there.
The left over for that month, you can use to cover your monthly cost and spend it on doing nice things. By doing this you also immediately place a cap on how much you can spend. And by lowering your costs, you can balance it out and add the extra income toward your savings budget.

Because we know how much we need to cover our costs of living, we easily put aside our bonuses and pay raises every year. With this, the money we can allocate towards investing will be growing even year after year. Our joined income grew 10%, for only this year. The whole 10% we get paid more every single month goes directly into our savings account.

So remember, only buy the things you really need or love to do. Put a cap on your spendings and place a budget on your savings. Even if it’s only small, you have to start somewhere. Just keep going. Because on the long term, every penny counts.

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