You don't need to meticulously track income and expenses (unless you want to). Instead:
- Reduce the big three expenses: housing, transportation, food
- Automate your investments and increase savings rate with each raise (to avoid lifestyle inflation)
- Keep track of your net worth
In More Details
In general, saving a dollar is worth more than spending it and earning another dollar. A saved dollar can be invested pre-tax, it won't go through sales tax, and it will grow overtime when invested. While earning more is important, it's also vital to avoid extravagant spending.
Budgeting has many benefits:
- get an overview of your net worth across all of your accounts
- visualize how much you're spending and where it's going
- limit your spending in specific categories
It's also not all-or-nothing. Decide how much effort you want to spend budgeting. You could just setup Mint to get a financial overview. Combining a financial dashboard with reducing your largest recurring expenses (housing, transportation, food) is more than enough to reach financial independence.
Popular budgeting tools include:
- Mint — link accounts for automatic overview of finances
- Personal Capital — personal dashboard of your finances
- You Need a Budget — if you want to keep track of all expenses
- Lunch Money — simple and easy to use budgeting software
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Calculate Your Savings Rate The most important number to early financial independence
Save on Taxes What can you do to save on taxes?
Save on Housing Buying vs Renting and the importance of avoiding lifestyle inflation
Save on Transportation Used cars and alternative methods of transportation
Save on Food Budget groceries, meal prepping, and less eating out