If like me, you want to be financially responsible this year or have certain finance goals you hope to achieve, this is definitely a post for you. On the other hand, if you haven’t thought of your finances this year, hopefully this post sparks up an interest in improving your finances. I recently got the opportunity to speak to a financial specialist and he shared some amazing tips on finances, mostly targeted at millennials but I believe this applies to everyone.
- You can never have enough resources.
- You need to prioritize your spending (i.e expenses). Break them down to first charges, basic expenses such as rent, insurance, credit card loans etc. and discretionary expenses (more on this)
- Cut your coat not according to your size but according to the material available to you. You have to live based on your actual income and not in anticipation of what you expect to earn.
- If you can’t manage what you have now, you can’t manage what you will get in the future.
- You cannot spend on expected income; you have to use available income. Basically, don’t buy things you cannot afford and load them all on your credit card.
- Don’t lend money your are not willing to lose
- Don’t invest with money you are not comfortable losing.
Basically, any money you receive ( paycheck, loan repayment or gifts) has 4 objectives:
- To be saved;
- To be invested;
- To be spent; and,
- To meet needs (this includes the needs of others)
- Don’t spend everything you have. You have to save from whatever you get, no matter how little it might be.
- You do not need to have a goal in mind to save.
- Saving is for the future, you can’t eat your future today. It is your responsibility to prepare for the future.
- You must control your savings. You can’t have your savings tied up with a loan to a friend (what if something happens and the friend can’t pay back?)
- Your savings must be under your control but not easily accessible (discipline). You might want to consider saving with the bank in a manner that is not easily accessible.
- Do not empty your savings for investments. You can take out a percentage of it to fund an investment, your needs or a vacation but don’t completely empty it for any purpose.
- When creating your budget, your net income (i.e. income less ALL expenses) should not be negative at any time. If this happens, you need to either cut down on your expenses or increase your income.
- So, you get your paycheck or pocket money. You need to take out your first charges- these include giving, savings and investments. (Giving in this case has two aspects- to God and to others. )
- After that, you have expenses available for spending.
- Think about your expenses like in two groups- basic expenses (Rent, Insurance, Groceries, Upkeep, and Basic wardrobe) and discretionary expenses (entertainment, travel, etc.)
Note: What might fall under basic and discretionary expenses would be up to you. Keep in mind that basic expenses are what you require to survive.
Unfortunately due to time constraints, I didn’t have the opportunity to ask all the questions I wanted to ask. However, this information has definitely changed the way I think about my finances. To make it up, I will share an interesting way I got to think about my finances and myself- as a business. Hence, my monthly accounts could be pictured as my income statement.
I have also created these sheets to help with filling out your accounts and budgets for the coming months. Hopefully, you find these helpful!
Finally, I have a savings challenge lined up this year (I will share more about this before the month runs out so, please be on the lookout).
2018- The goal is to be financially independent!