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the power of saving
We are not talking about greed. We are talking about making money to support yourself. Building habits to create financial freedom and a life filled with options.
Whether your goal is to own a plane and fly guests to your tropical island every weekend for a fabulous party OR
if your goal is more practical and you want money to go to college or varsity, buy a car and a house, or help people in need.
The starting point is to DREAM BIG!
What are you waiting for … get started now AND make sure that you have fun doing it!
Having a plan is the foundation of your financial future.
Once you have determined your dream - set your personal goals and your financial goals. You will have a better chance at achieving your dream if you set out your goals - break these goals into short, medium and long term goals.
Short Term Goals - tackle 1 year at a time and break the year down into the activities that you need to complete in order to reach your goals. Break up the goal achieving activities into the 4 quarters of the year. Your short term goals are typically for something you are saving up for to buy in the next 3, 6, 9 or 12 months. Calculate the total cost of your goal and how much you need to save every month and how you plan to do this.
Medium Term Goals - these could be goals are for example buying a car, saving for college or varsity or perhaps a gap year overseas. Calculate the cost of your goal and divide this by the number of months and years you have set yourself to achieve this goal. This is how you will calculate how much you need to save each month. You may get a shock and realise that you either need more time to reach your goal. You can modify your goal or you can work on a plan to earn more money.
Long Term Goals - these are goals that you should set for 10, 15, 20 years into the future. Ten years from now may seem a really long way from now, but it is just as important to have long term dreams, which you can break up into medium and long term goals.
In future Money.Life Editions we will teach you how your money can start making money for you in order save and plan for these goals.
Write your goals down, draw pictures to go with them or cut out images from magazines! Stick them on your mirror, in the front cover of your diary, in the door of your cupboard, on your pin board above your desk, on your ceiling above your bed ...
You have a greater chance of achieving your goals if they are in plain view every day!
A budget is your own financial road map. Without directions and a goal you will have no chance of finding your destination
Setting a budget is not complicated and this can be done in a book or using a spreadsheet.
Create Budget Categories and Sub Categories as per the example below:
Income – Part Time Work
Short Term Goals
Medium Term Goals
Keep it simple and make sure that you don’t spend more than you earn.
If you do spend more than you earn:
In future Money.Life articles we will focus on saving money and cost saving.
As you develop the good habits of budgeting, you will need to include an emergency fund category. Your parents will be blown away when you are able to share with them that you have 3 to 6 months income set aside in case of emergency. Should the emergency never come, you can then invest this savings towards your medium term goals.
You will find that your budget will need some fine tuning as you start to get the hang of it.
Mastering this simple planning tool will give you a gift that you will use throughout your lifetime.
Select the email budget template below, if you would like an MS-Excel copy of a budget template
When you plan your week ahead, pull out your budget and review this against the actual expenses for the week. Don’t leave this until the end of the month. For two reasons, one it will take a lot more effort to collate and secondly you will not be able to adjust your spending to prevent you from blowing the budget.
You may find that some luxury expenses need to wait until you have enough money or you may find that there are many more areas that you can cut back on your expenses to allow your income to go further. For example, take lunch to school/varsity rather than buying from the tuckshop or café. Have a movie and popcorn night with friends at home instead of going out. Use free Wi-Fi as much as possible rather than your mobile data.
Congratulations if you have cash left over, you will feel empowered when you transfer this into your emergency account.
The current statistics of the number of young people in debt are really scary. You don't want to become a statistic and for that reason you want to start the habit of budgeting. A budget allows you to create a spending plan for your money. It will ensure that you always have enough money for what you need and for the things that are important to you.