Financial planning always comes with financial motivation. A motivation that comes with knowledge.It really takes a lot of hard work and motivation.
Analyse and Divide your income
-Firstly, analyze where your income from and of course try to increase your income. Divide your income into your expenses that shown below:
Food %
Entertainment %
Emergency Fund %
Commitment %
Saving %
Investment %
-It is always recommended to allocate 20% of your income into investment. Investment is different from your saving. You will definitely get back your saving and some interest after a certain time frame. For example, putting money into your fixed deposit account. Every bank has a different interest rate. So is better to compare the interest rate before saving. You will know the returns after a certain time frame. Investment has some risks. The higher the risks, the higher returns you will get. You may or may not get back the initial amount but have a higher returns. Do read my previous post if you want to know more about investment.
Increase net worth by
-Setting aside a bigger portion of your income for investment
-Paying off your current debt (Be reminded that your debt will eventually double-up if you don’t pay off)(If no interest just leave it :)
Analyse cash flow
-Identify what are area overspend especially in entertainment.
-Cut down unnecessary expenditures ( I know is hard but at least give it a try you will eventually release that you can save up that much of money.)
Divide your financial goals and prioritize your goals
-into 3 different periods in order to see clearly and easy to strive for your goals
-short-term (<3 years)
-medium term (3-5 years)
-long-term (>5 years)
There are also a few section that you really need to save your money in:
A Fixed Deposit Account
-The amount is between your 3-6 months of your income.It must be easy access to withdraw the money in case anything happened.Emergency fund
-For example, buying a medical insurance help you to pay the high amount of doctor consultant fee.
3.Investment
-As I mentioned in the last post-investment is really important. Invest in property, gold, buying a share or invest in a commodity.If you not experience or you have no time to monitor the market.There are other easier investment vehicles that you can try first….Like buying some unit trust funds which will be monitored by experienced fund managers. Once you’re confident to invest money on your own, you can always open a stock brokerage account.
-There is also a formula to calculate how many years you need or the interest rate on products to double up your money.( The rule of 72.) 72 divided by the interest rate of product equal how many years to double up your money. Same goes to rule of 114 to triple up(x 3) your money and the rule of 144(x 4) to quadrate up your money.