Spending your way to wealth begins with keeping track of the money you receive or earn. In many instances, how you choose to handle the money you have is often what determines your financial success. A good spending plan is a written draft that describes how you can achieve the financial goals in your wealth vision by managing how your earned money flows out.
Save before you spend. This is the easiest way to set yourself up for financial security and live debt-free. The best time to save money is when you receive it. Think about establishing your emergency fund or focus fund. An emergency fund helps you to be able to withstand unplanned spending emergencies such as hospital costs and repairs on damages. The good thing is, if you don’t spend it and keep saving, it keeps growing. And with institutions such as mutual funds and money market funds (MMFs), you will be able to earn interest on money saved.
Your focus fund, however, aligns your savings to your short to medium-term financial goals. Steve Down teaches more on how you can create your own focus fund to accelerate you towards financial security and wealth in the Financially Fit For Life Program.
Household expenses are a recurrent expense for most people. Since a majority of them comprise bills for utilities and services we cannot do without, it’s always an added advantage knowing how we can pay for them. A good spending plan takes into account what expenses are regular payments that are necessary. This helps with prioritizing your spending once you receive your hard-earned cash. Common living expenses include house rent, utility bills, grocery and household items, transport or fuel and insurance costs.
Always prioritize payments on essentials necessary for you before you think of spending money elsewhere. This also helps you steer clear of debt especially when you postpone paying bills.
Any borrowed money that has not been paid back stands in the way of you achieving financial freedom. Sometimes it might be hard to avoid debt especially when financial emergencies happen. When it comes to financial fitness and freedom, your goal should be to live debt free.
Take time each month to see how you can pay off debts. You could prioritize in order of the largest to the smallest amount, highest interest, consolidate them all and take one to pay for them all as you contribute regularly or even negotiate your debt.
Be careful when it comes to handling debt. Bad debt can be a great financial leak in your savings and may compromise your wealth creation. This is why it is better to have all debts as a priority to deal with in your spending plan.
Always have a list of paid services that you pay for monthly. Subscription services for music, movies and even regular deliveries come in this category. Online subscriptions and membership fees are also included here. Since a majority of such payments are often used regularly, many people tend to automate their payments. This makes such payments easily forgotten and form a huge chunk of spending within a year.
A good spending plan comes in place here so you can know how much money flows out to your subscriptions. In instances where you face inflation or job loss or want more money to invest, you can adjust how you spend on this category since it’s a lesser priority compared to essentials.
No attack on cheerful givers, but giving also comes to your spending plan. Your giving goes a long way in building a wealth mindset. In fact, giving is one of the great principles of wealth that we teach. However, this should not be done unsustainably and end up in financial distress. Knowing how much goes out and what effect it has wherever it goes is essential.
When it comes to investing, start! Start small. Start and stay committed. At first, begin with low-risk investments if you are a beginner. Gradually, you can grow your savings and emergency fund so that as you invest, you have a cushion in cases of loss. Learn along the way how investments work so that as you upgrade, you can invest in what you know and what works for you. This in turn improves your cash flow. Most people settle on calculating a percentage of the total they earn to the ‘giving and investments’ category in their spending plan. As a beginner, you can start with 10% – 20%.
This category arguably has the lowest priority in spending. Nevertheless, it is equally as important to your spending plan. Always set some money aside to cater to your leisure spending. Keeping track of this category helps you control unnecessary spending. This is because this category is often where our emotional spending happens the most.
It includes eating out, entertainment, vacation, clothes and shoes and items that are not so necessary but are affordable to you.
Your spending greatly determines your future financial position. Good money management is the best way you can achieve your financial goals and future. This is why at Financially Fit, we help you spend your way to wealth. Budgeting can only do so much in helping you restrict your habitual spending. But with an abundance principle, we teach how you can spend the right way to gain financial security, clear your debts and achieve financial freedom.
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