Budgeting
Oftentimes people get confused with budgeting, asking themselves what it is? How does it work? and why should I do it? Hopefully, after you finish this reading you’ll have a better understanding of the concept and how to apply it to your life. We also offer a FREE budgeting spreadsheet.
Create budgeting plan
Budgeting is simply planning where your money goes before you actually spend it. Make estimates of possible expenses that you may have throughout a certain period of time, separating them into different categories, and comparing those expenses with your estimate of income/revenue for the same period. Contrary to popular belief, budgeting is not a tool limited to businesses, many individuals use it in order to gain awareness of their current financial situation, help them set future goals, and lead them to make better financial decisions.
Savings
two main reasons people have savings are for emergencies and saving for retirement. The emergency fund has 3-6 months’ worth of expenses so this includes the essentials like rent, food, transportation, and anything else that you NEED to survive. This is just in case of a loss of job and the time it takes to find a new one. The emergency can also be used on other emergencies, like urgent car repairs, medical emergencies, or anything that is an emergency to you. If you are having trouble classifying which expenses are emergencies or not ask yourself these 3 questions. Is it unexpected? Is it necessary? Is it urgent? If yes is the answer to all three of these questions you should definitely use your emergency fund.
Investment options
Once you have established an emergency fund that you feel comfortable with, the next reason people save is for retirement. Putting money aside or potentially putting that money in various retirement accounts(IRA, Roth IRA, 401k) sooner rather than later can make a huge impact on your retirement.