Three Tips Towards Financial Security
July 20th, 2010 Filed under: Personal Finance — Finance Author
As any accountant will tell you, when it comes to generating abundance in one’s life, there are some fundamental common sense rules to follow.
It is often said that money can’t buy one happiness, but the fact is when one has a mortgage and a family to feed and no money coming in, or less money than is needed to meet the bills, life seems pretty uncomfortable and tough.
Starting and running a business can be extremely fulfilling, but if that runs into financial difficulty or one experiences bankruptcy, this can be disastrous and simply underlines how little control we often seem to have over our life outcomes.
In the same way, an early grasp of these pitfalls can lead to us not following our dreams at all. Some very capable people languish in jobs and lifestyles they hate, because although they have the capability, they have had the belief sucked out of them by their perceived threats of bankruptcy and failure. Rather than take a chance, they feel the odds are stacked against them.
However, it is possible to develop what is called a “lifestyle strategy”, so that whatever one does, should things go wrong, one has some breathing space and the ability to survive financially. This is done by adopting some fixed habits.
1. Perhaps the Most Important – Don’t Kid Yourself.
It is so easy to spend more than we earn, especially with credit cards. Keep a written record of how much you spend, be it credit cards or cash. Don’t adopt the mentality of spending today and paying off “sometime”. Open your bank statements and don’t leave them festering in a drawer.
By writing your expenses down, you will see the truth behind the “I only occasionally impulse buy”.
2. Make a Budget – and Stick to it.
Losing control of your finances is one of the quickest ways to become stressed and miserable. Make a list of all your outgoings on the right side of the page, and leave plenty of space underneath so that you can add things as you spend money that is not included in your fixed outgoings. This is a living document so that you can keep track daily of your expenses.
On the left side write in your total income for the month, after tax. This gives you the figure you must not exceed. As your expenses on the right are added, deduct them from the total income to give a running total. This way you always know how much money you have in hand.
3. Save 10%
To build up a cushion for future financial security, try and save some money every month. Ten percent is a good figure to aim for, but this may not be realistic – just try and save something, but set an actual monthly figure. Rather than blow what’s left over of the budget every month on an indulgence, save it!
It may seem like a trivial amount at first, but it soon adds up, and should things go wrong you at least have something to fall back on.
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