Setting financial goals
- Establish financial goals – before creating a budget, you must first consider and establish your own short and long-term financial goals.
- To achieve your financial goals, identify your goals clearly and why they matter to you, and decide which are most important.
- Once you have prioritized your list of goals, keep your spending on course. Expenditures you make must be taking you nearer to your primary goals.
- Focus first on the goals that matter. To accomplish primary goals, you will often need to put desirable but less important ones on the back burner.
- The most important ally you have in reaching your goals is time. Money stashed in interest-earning accounts or invested in stocks and bonds grows and compounds
- Your goal should be to reduce your spending to at least 90% of your income, with the aim of plowing the remainder into the financial objectives u deem most important
- When setting financial goals, choose something that is important to you. It will keep you motivated to follow through
- A goal is only a wish until you set a date. So now, I want to own a property by Dec 2009 is a real goal. Without a deadline, chances are, it will not happen
Budgeting
- Develop a budget you can stick to that captures all your home expenses, including setting aside money for saving. This ensures you are in financial control
- Your monthly budget is closely tied to net worth . Make more than you spend, and the extra income ends up in either increased savings or decreased debt
- There is nothing wrong with buying several things at the same store, however, stay aware of what you are buying and how much it will cost. Stick to your budget
- Keep track of every expense, including the small ones & remember to save your receipts. Keep records of where all your money is going
- Withdraw a certain amount each week or month for expenses & enter this in your budget. This method will prevent you from overspending
- Update your budget daily. Tracking your money this way will take minimal time, and you will be less likely to forget something.
- Write down your expenses by what they are rather than where you purchased them so you can figure out later how much you spend in particular categories
- Budget by the month, not the Paycheck. This forces you to think longer-term than your monthly paycheck, but not so long-term that you are likely to get derailed
- Remember that budgeting is not about deprivation; it is about putting your money to its highest and best purpose
- Plan for both fixed and variable expenses. Some costs, like groceries, can fall into either category depending on how much self-control you have.
- Plan for occasional expenses. Budget for expenses that only happen a few times a year like gifts, car insurance and doctor visits.
- Allow your budget to be flexible. If you want to spend more on groceries one month because you are having a party, then spend less in another area to compensate
- Leave room in your budget for some fun things. If you do not reward yourself, it will be emotionally difficult to stick to your budget in the long run.
- Always make sure, however, to keep spending below your income. Special events like Christmas should also fit into your income.
- Major purchases, like a new car or a wedding, require adjusting your budget by cutting back spending in one or more categories so you can afford them
- When you incur a major new expense like buying a house, prepare yourself for the change & make sure you can afford it, adjust your budget several months in advance
- Write down an investing plan & budget. A budget controls spending & boosts savings each month. An investing plan takes the emotion out of your investing decision
Saving
- Make frequent and regular deposits in a high interest savings account or money market account . Your financial success begins with your willingness to save
- Contribute to company sponsored pension plans or NSSF. Many experts estimate that you will need about 70% of your pre-retirement income after retiring
- Consider comparison shopping for must have items – comparison shopping can have a big payoff for just a small amount of work, especially if done right
- Start a rainy day fund to make sure unforeseen expenses do not cause your goals to careen off track, build up cash reserves, about 3 to 6 months worth of expenses
- Save Automatically. Use automatic withdrawals to stick to your savings goals so you wont be tempted to steal from your future self.
- Save for emergencies : Whether you save 3, 6 months, or a month worth of living expenses, save for emergencies. Otherwise, u are living paycheck to paycheck-Pay yourself first! If U wait until U have met all Ur other obligations before seeing what is left over for saving, U may never have healthy savings or investments
- Set aside a min of 5% to 10% of Ur salary for savings B4 u start paying your bills. Have money deducted from your paycheck & deposited into a separate account
- Employment benefits are worth big bucks. Maximize yours by taking advantage of the ones that can save U money by reducing taxes or out of pocket expenses
