There are many ways of creating healthy and increasing wealth. There is one fundamental law that governs your money and this is thru personal experience. Maybe some of you have been doing this expertly already, but you maybe surprise that there are still a lot of people that are not doing this practice (good financial budget). I was not initially and no matter how much I earn, it would not be enough. My basic principle that I always follow is as below:
[WEALTH] = [WHAT YOU EARN] - [WHAT YOU SPEND]
Being disciplined when it comes to personal finance budgeting is a key component for anyone seeking financial freedom. Managing your finances is the first step to starting down the road to building the life you always wanted and the quickest and easiest way to do this is with a budget.
5 Essential Steps of preparing your own Personal Budget that I learnt over the years
Effective budgeting is important for any kind of business or personal finance management in good times and bad. With the 5 ways stated below implemented consistently, I would say you have completed the 1st step in creating wealth.
1. Dive into your spending list.
List down your current list of expenditure for the past 6 months if possible to have an average number of what you have spent. Then go deep down and ask your self whether you really need to spend on the things that you have spent over the 6 months.
2. Set goals
Financial budgeting helps you to set goals and measure your progress. Think of budgeting as a sort of strategic plan for your financials. It can also be a great financial map helping guide your success. When things start to drop financially, always look at your projected budget as your home base. It’s the place where you should be financially.
End in mind is how much you can save from what you earn. Try to be aggressive on the goals and be disciplined to achieve it.
3. Consistently monitor progress of your goals
Financial budgeting should be an ongoing process. Many times, people would be extremely excited after creating their goals or budget plan but start losing discipline along the way in implementing it. It should be part of your monthly tasks and a way to constantly measure progress. If you discover areas where you are continually falling short, then you can go ahead and make responsible changes based on hard data.
4. Create room for investments in your budget
Always allocate a percentage of budgets from what you earn to good investments or business opportunities. If possible, I would suggest not putting your money into fixed deposits in banks. This is because the rate of inflation would be either higher or equal to what interest in return in putting your money into fixed deposits.
5. Cut corners the right way
Simply put, streamline but don’t get rid of important services or requirements that you really need when devising a budget. Take a long hard look at your business or daily work and what it really needs.
There are many budget calculators around but my personal favorites are as below:
Online tool:
http://www.simpleplanning.com/
http://www.mint.com/
http://www.microsoft.com/MONEY/default.mspx
You can choose any of those above or create yourself but the crucial thing is to follow the 5 steps above to be successful.
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