How To Strike A Balance Between Spending And Saving
Life will become a financial struggle if not planned properly. That is why financial planning plays a crucial role. In the absence of proper planning expenses will exceed income at one point. You will not have a track at all and this would pose a nasty surprise. It becomes very import to strike a balance between spending and saving.
Income and expenditure: Ascertain what comes in and what goes out. Maintain a record of daily expenses. This is very important. It can be used for planning and future reference as well.
Needs/ financial goals: Ascertain your financial goals. There may be short-term goals related to your desires. For example, you would want to have a trip to France after 5 years.
Long-term goals are related to financial commitments that may incur after longer time-say 20 or 25 years. It may be retirement planning or buying a fixed asset.
Budget: Once you decide your goals, start analyzing how much you can afford to save from your income after meeting your expenses. Also, provide for emergency expenses. Then plan how to invest savings. It can be in the form of fixed deposits; cryptocurrency trading using apps like bitcoin loophole or share trading. This review focusses both on earnings and investment.
Cut expenses if required for initial years: Find out all the unnecessary expenses and cut down on the same at least during the initial years of your financial planning
Avoid shopping without preplanning: Unplanned shopping will lead to unwanted buying expenses and burn a hole in your wallet.
Generate extra income: Generate extra income using your hobbies. Share work at home and motivate family members to earn. Create a common fund out of the total family earnings and spend this for family welfare.
Goals must be in unity: Financial goals of all the members of the family must be in unison. Sit together and discuss. Make others understand and cooperate in reducing expenses.
Become debt free ten years before your income stops: If your retirement is at 58 years ensure that you have closed all the loans within 48 years. The remaining earning years should be used for accumulating funds towards your retirement.
Save a little for spending also: Stinginess kills saving motivation. It is nothing wrong in occasionally going for a short weekend vacation or dinner in a costly restaurant. Such a habit will motivate you to save more.