It is often said that the first step to financial independence is not about how much you earn, but about how much you save.
What percentage of your salary are you saving a month? How much are you choosing to spend? Do you save first and spend the rest or spend first and save the rest?
Having the right mindset to budget for your finances can go a long way and here’s how you can do so.
Even if you have enough to live comfortably, budgeting can help you keep better track of your finances, build better financial management habits, and reach your financial targets.
5 reasons why budgeting effectively is a crucial first step in helping you reach financial independence
This can be achieved if you choose to save first and spend the rest.
In doing so, you have more certainty on how much money you will want to allocate for savings (it should be a fixed amount every month unless there are unexpected emergencies), before setting different budgets for different categories of expenditure, such as on fixed expenses like rent, and variable expenses like dining out and shopping.
Setting different budgets like this will enable you to make more effort to pick more cost-efficient choices. You might be surprised at what a long way saving $100 per month can go.
Use this handy calculator to visualize how much your savings will grow over time..
The habit of self-discipline can extend beyond managing your finances to other aspects of your life.
For example, once you get into the habit of mindful spending, you might find it easier to exercise self-control in your diet or to abstain from spending too much time on computer games. This discipline will be useful in many areas of life, empowering you to live a more fulfilling and well-spent life.
All these various aspects play an important role together in your journey towards financial independence.
Life is full of unexpected turns, especially during such unprecedented times. Sometimes, you might just encounter unexpected emergencies such as emergency medical expenses, requiring a replacement of a lost item, or retrenchment.
With proper savings and budgeting, you would have a healthy buffer in your finances to cover some of these unforeseen costs.
Of course, there are also times when these emergencies demand more than you can afford. In these cases, a personal loan money lender in Singapore would be able to help you ride through these tough times.
When you make and follow a detailed budget, such as taking into account your budget for various categories, like food, shopping, investments, and so on, you are also keeping track of what you spend.
If you review this monthly, it can give you insights into which areas you can optimise your spending in and how to improve your spending habits.
It is possible to save up and pay off your loans at the same time.
If you can do your budgeting for your expenses well, and include all your debt repayment as part of your budgeting, you will be able to clear your debt more quickly and reach a debt-free life earlier than expected.
Budgeting is not just useful for saving money, but also for inculcating good habits and financial management. Most importantly, it helps you get onto the right track to reach financial independence.
The right budgeting plan that works will differ from person to person, depending on your financial abilities, debt, lifestyle, and goals.
If you are struggling to clear multiple debts in the first place with a good financial plan, it is recommended to take a debt consolidation loan so that you can consolidate multiple loans into one. It would greatly empower you to be able to clear all your debt more quickly.
If you need any help, our loan officers at Goldstar Credit are always available to work out a suitable loan plan for you and provide you with financial planning tips that can help you escape the debt cycle.