One of the best relationships that you would have is the one with your finances. Building a good relationship with my money doesn’t mean I earn a lot. I can say, good money management means living without debt while building your wealth. It is important to know the foundation of budgeting your money, and applying the rule “living within your means”.
I am sharing with you tips on how I supercharge my finances to build wealth so you, too can have a good,, or better relationship with your money. You can also read this blog where I share my minimalist way of spending money.
- Ceate a Financial Plan. They say when you fail to plan, you plan to fail – and this also applies to budgeting your money. A financial plan includes a monthly budget (which has a list of your income and expenses), emergency fund (should be at least 6 months worth of your living expenses), and insurance coverage (it is important to insure yourself of cancer, car accident, or death).
- Create a Monthly Budget. I have an excel file that lists all my sources of income, expenses and allocation amount for each. This would give me a clear view of how my month would look like, and which items have the biggest share on my expenses. I can adjust this according to my needs and urgency For example, I have allocated a big amount of budget for my Health and Medicine for this month, but in the coming months, this budget may (hopefully) change. If I see that my income would not be enough to cover for these expenses, I can take action and find ways to earn more for the month, or adjust my budget for other expenses like Food and Clothing.
- Identify and Pay Off Your Debts. One of the things that can give you peace of mind is knowing that you are living debt-free. I do love using my credit card for my advantage (earning points, rewards and discounts are the best thing about credit cards!). But always keep in mind that “if you cannot pay it in cash, you cannot afford it”. If you found yourself in debt, it is important to identify them and pay them off. To reach financial freedom, you have to get out of the debt first. Follow the tip I shared about creating monthly budget to set amount to pay off debt.
- Don’t invest in anything you do not understand. Everyone’s goal is to build and grow their money, but we have to know that we understand where we put our money. Make research, consult with professional, and study the business before investing your money.
- Delay Gratification. I notice that most people easily upgrade their lifestyle after they get a salary raise, or earn a little profit in their business. They buy the latest mobile phone, get a car loan, or apartment unit. I practice delayed gratification everyday, and it takes a lot of discipline and practice (especially that shopping and closing deals are now easier online). Don’t get me wrong, I always treat myself to experiences and things I deserved. But for making a big purchase, or upgrading my lifestyle, I have to think twice. Besides, I find it more satisfying to know that I can afford to upgrade my lifestyle and buy luxury goods, but keeping the money instead for a greater reward in the coming years.
How are you guys managing your budget and building your wealth?
I hope you find this post helpful.
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