This post is also available in: Spanish
By Zuiry Gaytan
“When I’m rich …” It’s one of our favorite phrases. We like to dream of a world of possibilities and comforts available at will, and the majority of the time, it sadly just stays as it is… a sentence. If you are a person who not only dreams, but turns your dreams into goals to make them come true, this section is for you.
“Number of days you can survive without working physically while maintaining your standard of living.” – Anonymous
Speaking in financial terms, and according to this definition, how rich are you?
If the answer is not as positive as you expected, then we have to start doing something about it. Throughout my life, I have seen many people stressed, selling their personal items or borrowing money, because they have no money to make ends meet or to pay bills, and this is basically due to a failure in the administration of personal finances. If this sounds familiar to you, then recognize the problem, and work on solving it.
First, you have to make a count of your income (all the money that goes into your portfolio or bank account), and your fixed expenses (all expenses that are a necessity, such as: rent or mortgage, insurance, services, transportation, and food). If your expenses are more than the money you receive, then you have to see what you are spending more and make cuts or adjustments. If money is still not enough, then you need to look for another source of income: a salary increase ( waiting for it to be deserved) or change jobs.
Second, you have to see what your variable expenses (expenses that are for pleasure) are: outings to restaurants, trips, purchases of clothing and shoes, payments of credit cards, cell phones, and expenses for momentary pleasures, such as buying cigars, junk food, among others. These expenses are also called, “ant expenses”. These expenses are the ones that do the most damage to your finances, because your money is being eaten little by little, without you noticing, and in the end, there is nothing left for saving, even if it is facing an emergency. So you must eliminate them or, at least, reduce them. With this, I do not try to tell you to not enjoy the fruit of your labor, but that you do it in an orderly and responsible manner. It is about having the freedom to spend on what you want, without this implying later financial problems.
Having money, or not having it, is more of a behavioral problem; it has to do with emotions. We need to learn to control them and avoid passing the card immediately as soon as a store mentions a discount, or something catches our attention
The ideal to control your expenses is to make a budget. This does not have to be a complicated process. You must add all your monthly income, then subtract taxes (if your employer does not automatically remove them from your check) and then all fixed expenses. With the rest, I suggest saving 20% for savings, 10% for an emergency fund, and to divide the rest into all your variable expenses, leaving a free amount for daily expenses.
The most important thing in a budget is to follow it and respect it. In the beginning, you may have to make some changes, and consider expenses that you did not take into account, but that will help you adapt according to your lifestyle.
In the following issues, we will talk more about budget; how to cancel your debts, and start generating wealth. Do not miss it!