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Your personal budget simplified

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money flow chart

The flow chart above depicts the flow of money.

Part of the reason we accumulate debt is that there are so many distractions in our lives – things we want to buy but don’t need.

But we also ring up debt because we simply don’t understand the flow of our income and expenses, so we can’t accurately estimate how much money we have available to spend.

Last year, I put in place a “Money Flow” system to help my family track our spending.Asimple way to plan your personal finances as below;

Set Super Strong, Meaningful Goals

What’s the point of even having a financial plan if you don’t have any goals? There isn’t one.

If you want to make headway financially you need goals that are strong enough to inspire you to action. Goals are what allow you to practice delayed gratification. For instance, if you have a goal of paying off $3,000 worth of credit card debt in six months, you know that if you spend $30 on a new dress that you don’t really need, you’re robbing yourself of debt freedom.(guilty*)

Prepare a Budget

Next comes either the fun, or horrid part, depending on your personality. I’ll go ahead and be the first to admit: I don’t like strict budgeting. However, I am very aware of what I spend my money on. There’s no right or wrong way to budget. You need to find what works the best for you.

 An Emergency Fund

You need a decent emergency fund before starting on other goals like accelerating your debt payoff, saving for a house, or saving for retirement. Emergency funds come in handy and will prevent you from paycheck to paycheck living.Most financial experts recommend that you have at least 3-6 months’ worth of cash set aside for emergencies. I agree, but ultimately, your emergency fund needs to be whatever makes you feel comfortable.

Debt Payoff Plan

I hate debts but we all must live with them somehow, after you’ve reached your desired emergency fund amount it’s time to really accelerate your financial goals. If you have high interest debt, like credit card debt, paying that off should be your main focus. Once that’s done you can choose to pay off lower interest rate debt or move onto saving and investing.one thing you need to be aware of, is retirement savings. You should have a retirement savings plan as one of your goals.

You can take all that cash you’ve been funneling toward your emergency fund and spread it between your financial goals.

 The Right Kinds of Insurance – You will Wish You Had it when You Need It

Insurance is often overlooked in a strong financial plan. The truth is, without the right type of insurance all of your hard work could go down the drain with one accident example the Auto Insurance, Homeowner’s Insurance, Health, Life Insurance.

 A strategy for increasing your income. We all know working hard only pays bill but does not get you the dream goals done, while working smart in the other hand would. For a lot of people, expenses aren’t the problem – its income. If you’re making $20,000 per year you’re never going to get ahead. You need to get creative and actively look to increase your income. It takes hard work and hustle but anyone can do it. You just have to have the right attitude.

Here are 50+ side hustles to get you thinking.

Review Your Financial Plan Often

As time goes by your financial goals and insurance needs will change. Review your financial plan often and readjust whenever necessary to see if it works.

 

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Author: Kate Mwamba

Financial and lifestyle blogger

2 Comments

  1. Eye opening. got something worth applying.

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