I recently read a column on inquirer.net entitled "Starting the new year right" It's about New Years resolutions we can do to improve our finances. This article is very helpful, if you're just starting to organize your finances. But I would like to add a few more details to the tips that were given in this article. Just to make it more complete and applicable to real life scenarios.
Tip # 1. Begin with your end goal in mind. In short, determine your financial goals.
You don't need to have just one end goal. Or you don't have to have a specific long-term goal if your still not sure what these goals are. You simply need to have a specific goal in terms of saving, whether long-term or short-term. Saving up for a computer or a retirement plan. A specific goal, with specific figures, makes it easier to save and manage your finances. But also be open to the possibility of changing your goals. What may have been a good idea to save for today may not be a good idea in the future. But the important thing is setting up a goal, so you can feel your progress as you go along managing your finances.
Tip # 2. Assess how you manage your money monthly.
It is important to take a cold, hard look on how much you really make in a month, if you're a wage earner. Most people only see the gross income (before taxes) and ignore the net income (after taxes and fixed expenses). A lot of people end up in debt because they spend more than what they actually earn. Awareness of how much you really have can make you more aware of where your money goes.
Tip # 3. Make a budget.
We've all heard this before and we've failed numerous times in our attempt on making a budget. We all know its important but it's just so hard to do!! Well, good news. There are no hard and fast rules in making a budget. You can make a budget adapt to your personality and your needs. If you're meticulous and gives total attention to detail, then the traditional budget (the one where you list down everything) is for you. But if you want something more relaxed, you can get an average figure for your major expenses (food, clothing, shelter). The most important thing is sticking to your budget. Make budgeting your money a habit and it wouldn't feel like a chore. Well, it'll still feel like a chore but not a painful one.
Tip # 4. Save for an emergency fund.
Remember that advice about saving 10% or your gross and never touching it. This is where that 10% should. Emergencies can happen anytime. I can't stress how important it is to have an emergency fund. Our emergency fund helped me and my husband through his hospitalization, car repairs, and a pay cut from my job. The experts recommend that your emergency fund should be at least 6 months your gross income. I can't stress enough how important an emergency fund is. Constantly replenish your emergency fund. Use it only on real emergencies (remember: death, disability, or unemployment). And if you can, have several emergency funds for specific needs. My husband and I are setting up a car emergency fund separate from a medical emergency fund. Yes, it'll cost us more and it'll take longer to save. But at least I wouldn't have to worry when one of us gets sick and the car breaks down at the same time.
Tip # 5. Cover the basics.
This tip can help you figure out the long-term financial goals discussed on Tip # 1. Especially if you have a family or you're planning to have a family someday. Try to get life insurance while you're young. If you have a car or a house, get those insured too. Make sure to properly store those insurance papers and don't forget where you stored them. Update your policies as soon as any major life events occur (birth, death, marriage), it'll save you a whole lot of trouble in the long run.
Tip # 6. Save for your retirement.
The experts say you should first save for your retirement before you save for your child's college education. Why? Because it's easier to help you're child when you're not helpless. Your child can look for scholarships or be a working student. It's hard to look for a job and support yourself when your old and sick. Enough said.
Tip # 7. Find ways to cut down on your expenses.
It's not the big expenses that drain our budget, it's the little expenses. The weekend Starbucks, extra merienda, and cheap toys. These small expenses add up and eat up your budget. But with the right amount of discipline, these small expenses can add up to big savings. Here's an example. Let's say you spend on a tall Starbucks mocha frap every weekend as a personal treat. That costs around P120, I think. P120 per week can add up to P480 a month. That's P5760 a year. See what I mean. If you can't give up the treats, find a cheaper alternative. Then save up the rest of what you would have spent on a frap. Trust me, it'll add up fast.
Hope the Inquirer column and my additional advice helped. Feel free to leave comments. Until the next blog, live free and frugal!
Tip # 1. Begin with your end goal in mind. In short, determine your financial goals.
You don't need to have just one end goal. Or you don't have to have a specific long-term goal if your still not sure what these goals are. You simply need to have a specific goal in terms of saving, whether long-term or short-term. Saving up for a computer or a retirement plan. A specific goal, with specific figures, makes it easier to save and manage your finances. But also be open to the possibility of changing your goals. What may have been a good idea to save for today may not be a good idea in the future. But the important thing is setting up a goal, so you can feel your progress as you go along managing your finances.
Tip # 2. Assess how you manage your money monthly.
It is important to take a cold, hard look on how much you really make in a month, if you're a wage earner. Most people only see the gross income (before taxes) and ignore the net income (after taxes and fixed expenses). A lot of people end up in debt because they spend more than what they actually earn. Awareness of how much you really have can make you more aware of where your money goes.
Tip # 3. Make a budget.
We've all heard this before and we've failed numerous times in our attempt on making a budget. We all know its important but it's just so hard to do!! Well, good news. There are no hard and fast rules in making a budget. You can make a budget adapt to your personality and your needs. If you're meticulous and gives total attention to detail, then the traditional budget (the one where you list down everything) is for you. But if you want something more relaxed, you can get an average figure for your major expenses (food, clothing, shelter). The most important thing is sticking to your budget. Make budgeting your money a habit and it wouldn't feel like a chore. Well, it'll still feel like a chore but not a painful one.
Tip # 4. Save for an emergency fund.
Remember that advice about saving 10% or your gross and never touching it. This is where that 10% should. Emergencies can happen anytime. I can't stress how important it is to have an emergency fund. Our emergency fund helped me and my husband through his hospitalization, car repairs, and a pay cut from my job. The experts recommend that your emergency fund should be at least 6 months your gross income. I can't stress enough how important an emergency fund is. Constantly replenish your emergency fund. Use it only on real emergencies (remember: death, disability, or unemployment). And if you can, have several emergency funds for specific needs. My husband and I are setting up a car emergency fund separate from a medical emergency fund. Yes, it'll cost us more and it'll take longer to save. But at least I wouldn't have to worry when one of us gets sick and the car breaks down at the same time.
Tip # 5. Cover the basics.
This tip can help you figure out the long-term financial goals discussed on Tip # 1. Especially if you have a family or you're planning to have a family someday. Try to get life insurance while you're young. If you have a car or a house, get those insured too. Make sure to properly store those insurance papers and don't forget where you stored them. Update your policies as soon as any major life events occur (birth, death, marriage), it'll save you a whole lot of trouble in the long run.
Tip # 6. Save for your retirement.
The experts say you should first save for your retirement before you save for your child's college education. Why? Because it's easier to help you're child when you're not helpless. Your child can look for scholarships or be a working student. It's hard to look for a job and support yourself when your old and sick. Enough said.
Tip # 7. Find ways to cut down on your expenses.
It's not the big expenses that drain our budget, it's the little expenses. The weekend Starbucks, extra merienda, and cheap toys. These small expenses add up and eat up your budget. But with the right amount of discipline, these small expenses can add up to big savings. Here's an example. Let's say you spend on a tall Starbucks mocha frap every weekend as a personal treat. That costs around P120, I think. P120 per week can add up to P480 a month. That's P5760 a year. See what I mean. If you can't give up the treats, find a cheaper alternative. Then save up the rest of what you would have spent on a frap. Trust me, it'll add up fast.
Hope the Inquirer column and my additional advice helped. Feel free to leave comments. Until the next blog, live free and frugal!
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