Hello readers,
If you are a young soul like me who started a career and earning money or you are an old sailor in the mid or near your retirement, you certainly know the importance of saving and investmenting your hard-earned money to grow wealth over time. Especially for the young and new minds who just started working in a company, NGO, or govt or started running a business, learning about budgeting and investing suddenly becomes an important chapter of our life, as we start to know that whereas our hard work can only get us handful of coins, investing them rightly at a tight time with a good plan is the only way to get the financial independence we all seek. In easy words. Budgeting is just like a financial GPS that guides us toward our goals and it is especially crucial for young people like us starting or in the early days of their financial journey. In this post, I will talk about saving and investing and will also try to break down budgeting into simple and actionable steps without going too deep into the finance mess. So without further ado, Let us take a deep dive in and learn how to take control of financial planning better.
Understand your Income
Rule number 1: Your income is the foundation or the bedrock of your budget and by simply calculating your monthly income from all sources (your full or part-time job, any freelance work etc.) you have to know the minimum earnings you make per month which will help you to make a financial budgeting plan accordingly. Having a clear view of how much we earn in a week or month is the first crucial step in creating a budget that we can maintain over a long period of time without any hassle or complexities.
Tracking Expenses
Do you feel so broke at the end of every month or sometimes even in the middle? If it is so, then maybe there’s something wrong with your spending rather than your earnings. Understanding where our hard-earned money goes is another major key to planning for effective budgeting. We should always start by tracking our daily expenses and I would recommend simply using your notes app on your phone to write down the cause and amount every time money goes out of your pocket, no matter if it is one cent. We all have smartphones these days and you also don’t need to buy any fancy software for it but just some seconds to type them down every time you open your wallet or access bank accounts. You can also maintain a simple spreadsheet or a simple budgeting app (there are some free apps available for both Android and apple) which can help you easily to track where your money is flowing. Do not overthink it, just follow this step for 1 or 2 months and keep the data for analysis.
No High Hopes - Back to Reality
Yes, we have to remove some old sayings from our minds as in today’s world, budgeting is not about restrictions, it is about setting your priorities or which ones you should pay for first. First, write down your financial goals somewhere whether it is saving for your dream vacation, paying off a big debt, buying a house building a business, or rather constructing an emergency fund. Don’t overthink this step and just write down what comes to your mind first. Another step here would be to categorize your expenses into needs (like rent and groceries) and wants (like dining out and entertainment). Do not judge yourself, wanting something is not evil but your ‘need’s need to be filled first so that you don't have any guilt when taking care of your ‘want’s.
Savings is the weapon
If you really want to change your life or want to see a better future, never ever negotiate on your Saving. First, select a portion of your income that you can save away without the need to touch it ever again. Now, start saving that portion of your income each month and also try to break down the whole saving amount into several parts and investment in different sectors - banking saving schemes like Recurring deposit or Foxed Deposit, share markets by directly buying shares at low prices or set a monthly SPI or lump-sum periodically when you see an opportunity. You can also choose to set up automated transfers to those savings schemes if available to make it effortless or take responsibility and promise yourself that you will do it in time, every time.
Yup, that’s it.. neither rocket science nor the complex blockchain technology… simple and doable by every one of us… but, what looks easy from far away may not be the same when close. There will be uncertain events, bad times, sudden necessities or impulsive desires that will ask you to break your savings but don't listen to those evil voices inside your head. But what if it is about health or family, well there’s nothing you can do about it and that's why it is wise to make an emergency fund first for these sudden troubles. But respect your money and don’t spend a single dime over any impulsive thoughts, yes that iPhone 15 max pro ultra gigachad edition won't make you rich but only make another dent into your life silently, so be careful and restrict yourself from evil desires.
Next, I would want you to be smarter than the crowd. We all make unnecessary expenses in our lives and give evil permission to eat our funds and our financial dreams. Small but daily expenses are making you poorer than buying an expensive phone or laptop every 2 years. That morning coffee with your name written on it just to make you feel good takes away a few bucks every single working day and adds up to a pretty big amount over time. Your 1000 CC bike or your favorite lavish car eats way more oil or gas to reach a destination accessible vis public transports or shared vehicles. We just need to identify all those areas where we can trim down some spending without sacrificing our quality of life. We just need to reduce some show-offs because ultimately it's our own money that we are burning to impress others who don't really care.
Another entity that may block you from saving is any uncertain tragic or emergency event. In this case, I would highly recommend creating an emergency fund first, which will be your financial safety net. We should aim to save at least three to six months' worth of whole family living expenses in a low-risk savings account so that rather than touching your savings accounts, crypto or shares, you can use this fund in bad times. It will provide us a peace of mind and financial security in unexpected situations and hence more confidence with the main goal.
Last but not least, before you start saving, you should pay off any ongoing loan on your name. I am told from my own family experiences, loans are the real evil of this modern society and loans are that making middle and poor-class people even poorer over time. Regardless of the total amount you have to pay or the interest rates, a loan on our head always gives us pressure and does not give us the freedom to think freely. Just end them, end all your loans if you are not a financial expert and use loans to make yourself rich. It loan-free life gives you a tension-free life and you can also intake 1% more oxygen every time you inhale, don’t believe me? Just pay off your loan and try breathing. Last but not least, the main thing is not making the plan but actually to stick on it for a long period of time or until you reach your goal amount. You will definitely feel challenges time by time, but how you handle them will define if you are worthy to have financial freedom or not. Just stay calm and think about your monthly savings as you are paying your loans if that helps.
