Financial Freedom – Creating Good Essential Habits With A Budget
In a world of low inflation and low interest rates we tend to find that living for today and just having the things we want is a far easier and tempting decision to make than saving up and having to wait for that new pair of shoes or latest gadget.
This mindset filters through to the younger people of today for both short term and long term needs or wants.
Retirement planning, wedding anniversaries, special holidays, children’s university fees. These potentially bigger planning needs come with likely larger associated costs to them. Which of these apply to you? How much provision have you put in place?
The number of people under the age of 40 we meet whom have next to no pension planning in place is staggering.
If you would put yourself in this age category then I have some good news. It’s not too late! All you need to start the ball rolling is a plan. It’s no good just wishing and crossing your fingers that it will all work out in the end. Start to plan your future now.
A Pension is a long term investment, the fund value may fluctuate and can go down. Your eventual income may depend upon the size of the fund at retirement, interest rates and tax legislation.
How? Next steps:-
- The first place to look is at your current income and expenditure. Look closely. Get your bank/credit card statements out and take a look at what comes in every month then take a look at what goes out. Go through the last 12 months of statements to capture all those annual commitments too. Don’t forget the cash withdrawals.
Write it down.
I am sure that when you look at the detail you will see there is quite a bit of discretionary spending where your income just seems to disappear.
- Next month (as soon as you get paid) pay yourself first. Save at least 10% of your net income. Do the same every month. You will be surprised by how quickly you will adjust to your new means. Let’s face it, since your income has increased by 10% you have probably spent it quite easily haven’t you?
- When you have saved for 10 months you should have at least a month’s salary all saved up. You should aim to have at least 6 months outgoings in reserve set aside in case of unexpected expenditure needs or if you are unable to work or are made redundant. This is your emergency fund.
Congratulations! You have started your journey to financial freedom by creating the first essential habit – saving.