In my previous post on Little FU#1, I outlined the steps I am putting in place for Little FU#1 to start his journey to FI.
I intend to do a series of posts to expand upon those steps so that anyone setting off on the same journey can get some ideas about how they may start on the path themselves.
I am going to keep it quite simple if possible, as there is so much information out there already you could spend months reading it all and end up not doing anything.
1 – JUST START – There is nothing more to add to this step. Just take action now.
2 – MAKE A BUDGET – Now some of you reading this may think ‘OMG I hate the thought of making a budget. Do I have to list out every single thing I spend money on and keep a track of my spending on a spreadsheet? That’s so boring.’
I must admit that whenever I have tried in the past to make a budget and keep track of spending to the exact penny that this always falls by the wayside after a few days, as the daily routines and general busyness of life take over.
However, I think it’s important to know what your essential and unavoidable expenses are, and where your money is going. You will need to go through your bank statements to identify these and find where savings can be made.
So, after identifying the essential expenses and dealing with those, do we need to track every other item of expenditure? No, after some thought, I don’t think that we do.
The process that I am going to put in place for FU#1 is, therefore, a quite simple budget strategy that anyone should be able to follow without having to track every little thing (and let’s face it – a 19-year-old wouldn’t do that, anyway!)
- Pay yourself first – Automate your savings to immediately come out of your net pay. This way you will never miss the money and be tempted to spend it. Aim to save at least 50% (why 50%? – I’ ll explore this in a future post, but basically 50% will allow FU#1 to FIRE in about 15-20 years, in his late 30’s).
2. Pay your essential bills – For FU#1, this means housing costs (board – usually straight to Mrs FU, I never get to see this!) travel costs to work (bus), and mobile phone contract.
3. The rest is yours to spend, or not, as you wish. Use only cash or debit card. There is no overdraft facility on FU#1’s bank account. This way you will not be able to overspend or go into debt.
In the next post on FU#1, I will detail out his actual budget figures at the moment and projected budget figures in the future.