Tips to help you with personal financial planning and adjusting your spending rate
Personal financial planning
One of the most important things we need to reach success and financial freedom is good financial management, meaning good personal financial planning and setting a suitable budget, in addition to controlling expenses in line with the monthly income.
Personal financial planning is essential in this world where the temptations of irrational spending have increased, especially on luxury or luxury goods. Therefore, it was necessary to manage financial responsibilities, follow up on expenditures and rationalize them, with the aim of making sound financial decisions, whether with regard to spending, saving, or even investment.
Some people may think that financial management skills and personal financial planning are important only for owners of projects or wealth, or they may think that the budget planning process is a complex matter, and in fact you only need some simple skills in addition to understanding the basic concepts in personal financial planning in order to be able to reach To financial stability.
And if you are wondering about the best way to spend or dispose of your monthly income or the money that you have in general, in this article we will talk about some of the advice provided by the most famous experts and specialists in the field of money management, which will help you to plan your financial affairs effectively. Where these experts advise us to do only some procedures that should be adhered to, and even make some lifestyle and lifestyle changes, which we will mention all of them below:
1- Set your priorities
It is very important that you prioritize your priorities monthly, in proportion to your income, and before you spend. Start with commodities, then move on to luxury goods.
Try to have all of your buying or consumption decisions rational, and you need to be more aware of emotional decisions.
2- Have a clear budget for spending
You should set a clear budget for spending and the amount of goods that you should purchase within a month, or even yearly and semi-annually.
It is also important that you try to develop this budget in cooperation with family members with whom you share expenses within the house, as this will help in rationalizing family spending in general and achieving financial stability within the family.
3- Avoid extravagant spending
Avoid extravagance when spending on any commodity, and you have to be especially wary of going overboard on matters where you cannot estimate the size or extent of your extravagance. Such as excessive use of water and electricity, where you can save these extravagant amounts and use them to pay a due bill, or to pay off a certain amount of debt.
Extravagance goes beyond those obvious aspects, for example, some resort to pretending to be rich, especially if they live in an environment of friends or co-workers who like exaggerated luxury appearances, and are always keen to get everything new, whether in the world of fashion or the world of technology or elsewhere.
Of course, extravagance does not mean that you have to reach the threshold of miserliness or exaggeration. You should only economize on spending, that is, spending on average.
4- He relied on more than one source of income
One of the best methods to help you get a bigger monthly income is to rely on more than one source of income, as it will help you start achieving financial success. According to studies conducted on a number of rich people, the multiplicity of sources of monthly income per capita mainly contributes to success and the achievement of great wealth.
When you rely on more than one source of income, you can convert the surplus amount or increase in the monthly income into an investable amount and thus multiply it and use it in a larger project that will mark the beginning of your era of stability and financial success and perhaps even enter the world of the rich. Of course, there are many options available for multiple sources of income, such as investing in the financial markets, establishing a business, and so on.
5- Reliance on investment and not on saving only
Your dependence on more than one source of income, as we talked about in the previous advice, means that you will get additional amounts of cash, and it is never logical to consume all of them without setting an appropriate plan for that. In the first place, you have to spend from one source of income and save your remaining income.
In fact, the amount that you save will not have much benefit if you do not invest it. When you leave an amount of money for the purpose of saving without investment, it is liable to decrease when you need it, but when you invest it, it will double and withdrawals will not affect it from one period to another. Therefore, it is necessary to make a clear and binding decision regarding the amount to be invested and the project to be invested in.
6- Set a clear goal for your savings
Saving cluttered will not be of much help, as if you set a clear goal for the amount that you are saving. Saving goals are intended, for example, to set a certain amount that you will save over a certain period of time. Or, for example, saving a certain amount by a certain amount to start investing it after 10 months, for example. This method helps you to commit and avoid spending without limits or in a thoughtful way.
Finally, it is not enough just to set a budget or financial plan for your spending, but you must follow it up on an ongoing basis to make sure that you are completely walking according to the plan that you set, or even to immediately identify the points of imbalance in the way you spend and fix them immediately to avoid their future effects.
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How To Manage Your Money (50/30/20 Rule)
How To Manage Your Money (50/30/20 Rule) In this video I present a high level overview on how to manage your money using the 50/30/20 Rule.
Money management is 90% discipline and 10% knowledge. The 50/30/20 rule will force you to create a budget and understand where every single one of your after-tax dollars is going.
50% of your budget should be spent on needs which are things that are essential to life and that you literally cannot live without.
30% should be spent on wants which could be classified as things that bring you joy and happiness, but are NOT essential to living. (Dining out, entertainment, hobbies, etc.)
The final 20% should be spent on savings, paying off debt, and retirement planning.
I have challenged myself to put away 50% of my monthly income into dividend stocks which is quite easy since I live frugal without debt. I work as an account executive, and make over $ 20000. $ 10,000 goes into dividends, and the other $ 10,000 covers my my food plus overhead expenses monthly. I am seeing improvements in my portfolio, dividends look certain, but I have to attribute this to only to guidance of a licensed fund manager who allocates funds to a plethora of assets. I have to stay disciplined, and remember that I’m in it for the long term. Good luck to everyone and thanks for the great video.
50 percent – needs
30 percent – savings
10 percent – wants
10 percent – helping others