The road to financial freedom can be a long and difficult one, and unforeseen expenses and unplanned emergencies can complicate the journey. However, five simple takeaways – if used effectively – can grant you the ability to maximise your budget and enjoy the most life has to offer.
Build an emergency fund
A great salary, savings account and a budget are all key in developing sound financial principles, but as John Lennon once famously said, ‘life is what happens when you make other plans!’
Emergencies are just that – emergencies – and they come about when you least expect them. In your monthly budget, try to save at least 5% of your salary. By doing so, you will build up an emergency fund that is there when you need it to pay off an unforeseen expense.
If you need help to kick start your budget, try our free budget planner.
Consider a second bank account for budgeting
It can be really easy to spend money unnecessarily as sometimes our wants exceed our needs. If you find it difficult to control ‘splurging’ and find your bank balance in the red, consider opening a second bank account.
Creating an ‘entertainment account’ will allow you to set aside funds specifically for fun, entertainment, or even that pair of shoes you saw on sale recently. This way, you are able to control impulsive spending and ensure you have money set aside to meet your financial obligations such as rent, school fees or debt payments.
Living modestly doesn’t mean living with less. While most of us dream about a large home and a fancy car, does this speak to your lifestyle or your immediate needs right now?
If you’re paying of an expensive vehicle or renting a home with unused bedrooms, ask yourself if these are requirements for a happy and healthy lifestyle. If the answer is no, , consider reducing expenses by trading in the expensive car for a smaller or cheaper model and look at alternatives to your current accommodation that are more suited to your needs and your pocket.
Make frugal investments
One of the principle keys to financial freedom is ‘equity’. For example, ownership in a company, a retirement fund, investing in a home of your own or the purchase of shares.
The earlier you’re able to invest, the more reward you will be able to reap from that investment in the future. By investing with an accredited financial service provider, you’ll be able to secure money for your future that will sustain you in your eventual retirement and beyond.
Spend less than you earn
Though it may sound simple, we’ve saved the most important principle for last. If you’re able to budget effectively and adjust your expenses to the point that you spend less than you earn, you’ll have more than enough money to not only save for emergencies but further consider a savings account and, eventually, an investment.
Remember, you can only spend less than you earn by sound financial planning. If you need some help to get started, consider beginning with the 52-week savings challenge!
More from our blog: