Defying conventional wisdom about budgeting your way to better money management, self-made Millennial billionaire Grant Sabatier recently told Business Insider that “budgets actually reinforce a scarcity mindset and hold most people back from saving and making more money”.
Sabatier’s take on budgeting is that it induces guilt and a sense of deprivation, making strict budgets a source of stress instead of a tool for empowerment.
If minding the pennies so the pounds will take care of themselves isn’t the right approach, what is?
Sabatier’s idea is to take a larger view – to look at your overall spending habits rather than how many cups of coffee you drink a week. The tips he shares at Millennial Money are about maximising savings as well as maximise income and include ideas like downsizing to a smaller home, cancelling gym membership to do yoga in your own living room, developing side businesses and becoming an entrepreneur.
The best place to start is to review your spending habits in the big picture – what are your overall spending habits and are there big expenditures you can address so that you save (and can then invest) more of your income? Look at your finances over a month, a quarter or a year for the big picture to see where your money is coming from and where it’s going.
That’s all well and good of course.
But where do you begin such an assessment?
One approach is offered by the authors of Your Money or Your Life, a book on financial philosophy and financial independence by Vicki Robin and the late Joe Dominguez. The book begins with an exercise to gather information on your income and expenditure and assess it terms of your life goals.
However you want to approach it, having a sound understanding of your finances is the first step in controlling them for better results. Instead of micro-managing with a no-avo-toast-for-you budget, get to grips with your entire spending regime. Perhaps you’ll learn how much is being wasted on paying for space you don’t need, on a gym membership you don’t use, or on cheering yourself up after a lousy day in the office.
Then you can use that information to make better financial choices and forge a path to financial independence.
If you would like to speak with a professional financial adviser about how finances are positioned for the year ahead, contact United Global Capital today on 03 8657 7640 or email [email protected] for a no cost, no obligation consultation.