You don’t need to be a financial planning expert to have a firm grasp on what this concept means and how it will impact you. What this will do however, is show you how the absolute basic fundamentals can help guide you toward a deeper understanding of how they work together to lay the groundwork of a solid financial foundation for you and your family – and for when you do eventually seek financial advice from an expert.
The first thing to do is create a detailed, written spending plan (or budget) which allows you to make smarter decisions with your finances on a daily basis. This will help you to recognise when you’re faced with spending money on something, that by keeping a budget will effectively ensure you stop and think about the purchase you are considering making.
When you set out to create your budget, always begin with a clear and honest picture of how much money you actually have available to you each month. You can do this by first identifying what your spending habits are, and how much, if any, is left over once everything else is accounted for. Ideally, you’ll have a surplus which you can use to put toward retirement, build an emergency fund, pay off debts such as credit cards, or apply to other financial goals you may have such as savings plans.
Once you’ve created your spending plan, you’ll find you have a much better understanding of where your money actually goes, and what areas could do with trimming back. You’ll also feel a sense of control over what you own and will soon find yourself questioning ‘wants’ over ‘needs’ when it comes to spending in the future. For many people, it’s a simple exercise that requires cutting back on the little things that eat up the surplus. For others, it may mean taking a closer look at unnecessary spending and make even further cuts to create a wider and more comfortable space between what’s coming in, and what’s going out.
