Tip #1 A failure to plan is a plan to fail
As said by Benjamin Franklin, this is definitely true when it comes to budgeting. If you do not plan your finance ahead of time, you will definitely encounter the situation where you run out of money.
Hence you need to learn how to plan your expenses ahead of time and get all your expenses into an excel sheet.
Tip #2 Elizabeth Warren rule (50-30-20)
Another way to accumulate wealth would be using the warren rule. Warren rule is a good guideline for people who are not sure about how much to save and how much to spend. According to Senator Elizabeth Warren, 50% of your disposable income should be spent on Needs , 30% of your disposable income should be spent on Wants and last 20% should be spent emergency and retirement funds.
For example, John has an monthly disposable income of $5,000. John can only spend up to $2,500 for his needs(50%), $1,500 for his wants (30%) and $1000 for his emergency and retirement funds.
Tip #3 Set up separate accounts
After finding out the amount to save and spend, you should set up separate accounts. With the advancement of technology, you can even automate the process with a click of your mouse.
Tip #4 Don’t touch it
Once you set up separate accounts, you can take a step further by avoiding temptations from catalog and brochures. Avoid going to places you know you will definitely splurge. Some financial experts may encourage you to adopt the 30 days rule where you wait for 30 days before you actually buy an item. This will help eliminate the chances of impulse purchase.
Tip #5 Do not walk alone
Ask your loved ones and friends to join you in this quest to achieve financial freedom. You and your loved ones can work together, encourage each other and feedback to each other. This will give you that extra strength you need to stay on track and save the money.
Tip #6 Have an end goal in mind
Before you start any form of planning, set up an end goal or target that you want to achieve. For example, Overseas trip at the end of the year. Having incentives and rewards in the planning helps you to stay focused on your plan. You won’t be able to last throughout the entire period without adequate incentives and rewards.
Written by Lucus Lim, Business Associate @capmarket