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How to create a budget and retire a millionaire

Updated on January 22, 2013

The most responsible thing a person can do when managing their personal finances is create a budget. Far too many of us don’t do this, and it’s no surprise that most of us live from pay packet to pay packet. Living this way will never allow you to retire a millionaire living in your beach house and travelling the world.

There is a few ways to get out of the financial (or lack of finances) spiral;

1. Win the lottery

2. Hope a rich relative passes on a fortune to you.

3. Get a 7 figure a year job.

4. Start up the latest social interactive web site and sell it to Google.

And then there’s the boring way;

5. Create and stick to a well planned budget. Did I just hear you yawning?

Call me cynical if you like, but did I mention that methods 1, 2, 3, and 4 aren’t going to happen?

That leaves us with method 5, “Create a Budget”. This article will help you create a budget and stick to it. Keep reading and you will even learn how to remove the “Yawn factor”.

Your newest expense should be savings
Your newest expense should be savings

Create a Budget

Step 1, identify your income.

Step 2, identify your current expenses. Don’t forget the bills that come around once a year, car registration, insurance, etc.

Step 3, prioritise your current expenses. Be critical here, do you really need those Starbuck's lattes’ every morning.

Step 4, write down some financial goals that you would like to achieve in a given time frame.

Step 5, determine how much you need to set aside for those goals.

Step 6, add a new expense as high up on your list of priorities as you can, call it savings.

Step 7, Calculate your income – expenses. If you are left with a negative balance or not enough to commit to regular savings, then you have some tough decisions to make. Make those decisions TODAY.

Budget Tips

A budget is not something you do once and then forget about it, you need to continually review and manage you money.

Keep all you receipts and review each month. Track your expenses and monitor against your budget. Continue to do this and you will be able to continually fine tune your expenses and you will find that you will appreciate your purchases more.

Entertainment is a necessity in any budget. Make sure you include an amount for your entertaining. You will go mad if you can’t have fun at some stage in your life. It is also one of the easiest components of any budget to manage if you are overstretched.

You should consider how much you spend in this area, do you really need to get out for drinks every Friday night, save you finances and your liver and make it every second Friday instead. Another method is to be the designated driver, you save on drinks and your friends save on cab fares, you can even get them to buy you non-alcoholic (cheaper) drinks for being so nice. When you go out do you should the bar for drinks, take a specific cash amount that you can afford to spend and no more, and leave the plastic at home.

Do you like to see every latest release movie, maybe its cheaper to wait and rent when it comes out on DVD.

There are many other areas you should consider, apply your thinking just a little and you will be amazed at how much you save. In fact, just by doing a budget you will be amazed at just how much money you waste. You may even uncover some fun things you can do that don’t cost the earth. As with most things in life, any activity or event is what you make of it. What you make them is up to you. Apply a little thinking and you can have as mush fun as you want, without the expense.

Be Smart, be happy, be wealthy
Be Smart, be happy, be wealthy

The extra credit section

Diversification of income is a major secret of how the rich get richer. The rich know that it is unwise to rely on only one source of income, so they diversify. You might say, well that’s great but I can’t afford to buys stocks in X, Y, and Z company and buy houses all around the world. Well start small, look at these links for some ideas.

Now you know, what are you waiting for.

The bottom line

The plan for your financial future starts TODAY, and it is you that will be responsible to make it happen. It is only you that will stop you from being financially independent, no-one will do it for you.

If you find that fella who goes by the name of “no-one” let me know I’ve got lots to talk to him about.


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    • thevoice profile image

      thevoice 8 years ago from carthage ill

      funny hub thanks