How to Budget Your Money?
Do you have money to save at the end of the month?
Everybody, from your grandparents, your parents to your teachers and friends, tell you to save money.
"But there's just nothing left to save!"
Many people, be it young or old, guys or ladies, are either facing this problem or have faced it before.
Believe it or not, there is only ONE solution to this and this solution ISN'T difficult at all! There are only a few simple steps to follow which can effectively eek out some money for you to save or invest at the end of every month!
Now let us see what these few simple steps are and how they are important to you!
Save At Least 10% First!
Once you've got your paycheck, the first thing you do is NOT to buy that glittery dress you've been craving for weeks nor the fancy laptop you've been laying your eyes on for months.
No, that's not the way.
What you should do is to keep a small percentage of your salary (income) in the savings account! It doesn't matter whether it's 10%, 15% or 20%, as long as it's comfortable for you.
As long as you can keep at least 10% of your income in your savings account, you're taking care of the future "you". 10% of this amount will accumulate to a big amount. And if you're able to invest it carefully and with a bit of luck, you will be a rich man or woman in the near future!
I know this is easier said than done BUT you just have to do it! It's a must. In fact, every rich man or successful investor in the world started by saving. And when do they save? Yes, once they've got their income, they save some portion of it first! Don't believe me? Google it.
List Out All Your Expected Expenses!
After you have saved that 10% (or more) of your income, what do you do? Well, take out a piece of paper (or Microsoft Excel) and list down the monthly expenses that you're going to pay. The fixed ones.
Examples of important expenses to pay off first are:
1. Housing loan,
2. Car loan,
3. Education loan,
4. Allowances for Parents,
5. Pension fund or EPF,
8. Card debts and
9. Handphone or LED TV Monthly Installments.
If you have kids, include their monthly school and tuition fees and other expenses.
After you've listed them down, add them up and see for yourself the total amount. If the total takes up a HUGE chunk of your money, think of ways to reduce it. Give up some unessential expenses (such as handphone installment) to achieve a more healthy budget.
Keep Some (~30%) for Unexpected Expenses
What are unexpected expenses?
Unexpected expenses are those that you cannot determine the exact amount and you can only estimate.
1. Public Transportation fees (if you don't own a car)
2. Car fuel, repairs, services (if you own a car)
3. Your meals (whether you're eating out or having a dear wife who cook for you)
4. Laundry (if you don't own a washing machine)
5. Groceries (towel, battery, pillow-case, stationery, books and the list goes on...)
6. Bills (telephone, electricity, water and so on...)
My advice is - keep about 30% of your income for this portion of expenses.
The Rest Is For You to Spend!
After you have saved some portion of your money, paid off the essential expenses and left some for unexpected expenses, that's when you should have a breath of fresh air. That's when you should be happy and excited because what's left of that money is entirely for you to spend!
This portion of money is entirely at your disposal. Go ahead and spend it on things you wanna buy, whether it is a new music CD, a new blu ray DVD, an interesting book about Investing or simply a brand new shoe. Spend it on a great evening at a fancy restaurant with your loved ones. It's time to reward yourself after so much hard work working through and sticking to this budget!
A word of caution however - only spend within the amount of this portion of money!
If There Is No Money Left to Spend
Increase Your Income!
If you find that what's left for you to spend is merely enough for you to buy a cup of coffee, then you gotta think of ways to increase your income. If not, like I've said, you've gotta cut down some of your fixed expenses.
So how do we increase your income? There are three main ways:
1. Find a part-time job as a second income (cashier, taxi driver, salesman)
2. Go for Passive Income or
3. Invest your savings into dividends-generating investment vehicles.
Practice Makes Perfect
If you find it hard to follow and keep to these few simple steps, don't give up just yet. Try your best to stick to it and eventually you'll get used to it!
VIDEO - Personal Financial Budget - Money Chat Episode 1
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