Financial freedom

Personal Finance Awareness and Recovery Treatment

Control Your Life

I am amazed at the amount of people I come across that don't even know how much money is coming out of their account every month. They really have no idea how much they are spending or on what exactly. No wonder there's so many people struggling financially and why some rich people get robbed  right under there noses for years.

The first step to financial freedom is to know just exactly how much money is rolling out every month. One way I like to keep track is that I use my credit card for everything. There is rarely any places that don't take them anymore. Online banking now offers reports, pie charts, and graph showing you exactly where you are spending your money. The Other ways I pay or move my money is through wire transfer which also leave a transaction record in my account. If you don't have an online banking account or credit card, get one. They will actually save you money and more importantly, time. But what can you do if you don't have them yet?   Start by listing all your fixed, recurrent expenses like rent, car payment, cable, and phone bill for example. All the expenses I am asking you to list are the necessities. What do I mean by necessities? Well, your $20 monthly subscription to a magazine or group isn't really a necessity. It's more like a luxury. Tink about it. It's something you want and enjoy but don't really need it. That's more or less the distinction between a luxury and a necessity.

After listing all fixed, recurrent expenses, list all fixed variable expenses like power, gas, water, groceries, ect. This bills are variable to the amount you use them but you use them every month. You should have an idea of how much they are on an average. Now, when you list this items always add a small cushion. For example, if your light bill on average is $120 then you might want to list it as $125 or $130. This is because you always budget with the biggest amount you would have to pays not the smallest. If you always budget for exactly $120, which is the average, then you will not be financially ready for the months that you are actually using more than average electricity. When you are doing personal budgets, it is always good to stay under budget, so you sort of over-budget to begin with. In this way you also always have some extra cash that you can use for investments. The only reason you should go over your budget is to make smart investments that will help you bring in money. More on that here.

The last set of expenses to list are the luxuries you buy every month. This are subscriptions to services like Netflix, magazine, ect. These are also any miscellaneous expenses that you have through the month. If after listing and adding all your expenses the amount is higher than your monthly income, then these luxuries are the first to go. That's the simplest recovery treatment. People normally go back into budget after that. 

Easy principles to apply for anyone, no matter their income. Live on less than you make, shed debt, don't borrow, invest wisely. Learn everything you need to know to get your head start into financial peace

Dare to join me?

Royal Island at Dusk
Credit: Ahmed Amir
Step-by-step, nuts and bolts of handling your finances. Dave takes the seven key principles of a healthy financial plan from Financial Peave and gives them a shot of adrenaline and a ton of muscle!

Smart finance

Now that you know exactly how much your expenses are, it is time to put you into gears to head for financial freedom. Whatever money you had left after paying for your necessities will be split into a few categories:

  • Savings
  • investments
  • vacation and/or luxuries
  • business endeavors (optional)

 The exact percentages of your monthly income that goes to each depends on you age, current financial situation, and how aggressive you want to pursuit  financial freedom. For example, a 24-year-old guy might want to split his remaining income after deducting the necessities amount into these percentages:

15% saving account

50% Investments like dividend stocks or real state (Passive income)

15% luxuries

20% Business endeavors (optional)

Business endeavors is optional since not everyone has entrepreneurship in mind, but it should stay an option in case you do want to eventually own your own business. If you don't, then that amount gets distributed among the other accounts.Remember, the best investment is to invest in yourself. Needless to say, investment should reap the biggest share.

Make your bank do this redistribution automatically every time your check clears. Do not leave it to your own discipline and will. Ask a banker to help you set up the redistribution if necessary but get it done. That's how you budget yourself to financial freedom. Now, do yourself a favor and go budget yourself into financial freedom and by all means get back to me and let me know where your incredibly journey is taking you. Questions?