How to Build A Strong Financial Foundation
Know Your Expenses
Make a list of your monthly expenses. Categorize it effectively so can assess which one is can be reduced or eliminate. Fixed expenses such house rent (or amortization), electricity and water bills, education and everything that are the expenses that we can not disregard.
Buy what you need and not what you want.
Eliminate or Reduce Debts or Loans
Credit cards, if not perfectly manage will eat up all our money. Sometimes this can be a tool for us to buy those are not really necessary. Interest in credit cards are computed monthly. They will required a minimum amount of payment, at least 5% of the total payable. Another 3% or more will be added to the remaining balance.
If we have already an existing credit card, try to pay more than what is required to lessen the length of time that we are going to pay it. It will somehow reduce the lost money. If you do not have yet, do not get.
Have a Savings
Expenses = Income – Savings – voluntary contribution to church
Most of us have the wrong way of saving. We usually save what is left from our expenses. Now, let us reverse it. Put in safe first an amount as savings and church, then spend what is the remaining. The sad thing is we do not even have anything for the church. I put there voluntary in a sense that it is not a fixed amount. It may depend on your income for a week or in a month. Well, we have different perspective in giving church offerings or donations but you will all agree that it is badly needed.
Part of our savings is the emergency fund. From the phrase itself, this the fund that we may need during emergencies. It should be at least 6 months of our monthly expenses. Let us say you have a P30,000 monthly expenses, you should have at least P180,000 savings. This is our safety net if there will come a time that we will be losing our job or we will be sicked and not able to work for a long time.
Have an Extra Source of Income
For an ordinary employee, we all know agree that what we are earning thru employment is not enough. Factors are cost of transportations, basic commodities, tuition fees and medicines, which are getting high every time. An extra income is very necessary to at least even up these expenses. Do not forget there is also what they called inflation rate. The value of our money will not be the same in the next years.
I am not a financial advisor. This is just a product of what I have read, heard and watched regarding financial literacy.
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