Many people desire financial security, few ever get to achieve it. There is freedom in spending money without having to worry where your next dollar is going to come from to meet your other financial obligations.
Financial security is the reward of a strict financial discipline and sound financial management practices. If you are not an heir to a vast empire and you are inheriting family fortune, then you have to work your way towards achieving financial security.
The first step towards this goal is to rein in on your expenditure. Not that spending is bad but you can’t acquire wealth and become financially secure if you don’t make your money work for you. That’s where a budget comes in.
Budget
A budget helps you track your expenses and keeps you in the loop of how much went where. If you are like many people and saving and investing is your only way out, then a budget becomes more important in charting your path to financial security.
Don’t just come up with a budget for the sake of it; stick to it. A good budget should be considerate of your spending habits and financial obligations.
You don’t even have to stick to the common practice of a monthly budget. Come up with one that meets your individual needs. It can be daily, weekly or even fortnightly.
Financial obligations
Before anything else, a budget should capture your essential financial obligations. These are obligations which failing to meet can have dire consequences. These include rent, utility bills, loan repayment, living expenses, food bills, commuting expenses, and school fees for your kids.
According to the 50-20-30 rule, which is a simple way to budget, you essential expenses shouldn’t exceed 50% of your income. This is the cap limit which if you exceed then you are practically living beyond your means.
So, find ways to make sure your expenses remain within the budget. If, for instance, you have a personal doctor, then using the Healthcare Salaries Guide you should find ways to fit that into the 50%.
Saving
Ideally, 20% of your income should go towards savings and debt repayment but with ever-increasing tuition fees, you will that you are laden with student loans and other consumer debts to pay back when the pay check comes in.
You will then find that a bigger percentage of your income goes towards these expenses thereby affecting the whole budget.
The way to go about it is to save on other expenses to give you more cash to save and clear your debts as soon as possible. Take the bus or train instead of hiring a taxi. Prepare home cooked meals instead of eating out more often.
These simple budgeting tips will result into surplus cash for savings and investment.
Use cash
While it is not practical or safe to carry cash with you everywhere you go, using cash in your transactions could save you a fortune in transaction fees and credit card charges. It is also helps with keeping track of your expenses.
Withdraw a sum of money to last you at least a week to save on ATM charges. This is also helps you stick to your budget if you are disciplined enough not to make other transactions within that duration.
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AFP
