It’s commonly said that it takes money to make money. That is effectively true – those who live payslip to payslip with no spare cash have little to re-invest or save for emergency. However, if you take the time to re-evaluate your finances, you’ll realise that setting aside even the smallest dollar can really add up over time.
Word of the day: Emergency Fund
Money that is set aside to cover financial surprises that may appear in life – the COVID-19 pandemic for example.
Remember these 3 numbers – 50/30/20
It’s simple in principle and in practice:
Your necessities (50%).
Your wants (30%).
Your savings & investments (20%).
These numbers aren’t necessarily fixed; however, they provide a strong foundation for building healthy financial habits to help you achieve your goals. During the current crisis where spending on fun stuff is limited, you may want to save the difference in your emergency fund until the lockdown ends.
Trimming the fat on your budget
If you take a bird’s-eye view of your budget, you’ll soon see that there are a few types of outgoings from your pay. You can think of them as this:
Investment/Emergency funds.
Essential expenses you cannot change.
Essential expenses you can control.
Non-essentials.
The key is to make your essentials as lean as possible by finding alternatives or shopping around.
For example:
Many people forget that basic household bills like internet and mobile phone plan can all be shopped and swapped. By switching providers, you can easily save hundreds off your annual spend!
Buy in bulk: you may look like a madman for a moment, but it really pays off to buy essentials in bulk.
Try to pay for things upfront or on time – some providers will give discounts for on time payments and avoid the late charges.
