We earn to spend. Sounds legit?

A scrumptious meal at a fancy restaurant, a cup of grande Frappuccino at Starbucks or perhaps weekend drinks with friends certainly provide happiness and instant gratification that one could not easily resist. If splurging $4 on latte makes you happy, who are these people to judge your spending habit? You have worked so hard and you definitely deserve to spend your paycheck on what you desire for.

I was always being told that if I wish to spend more, I should be earning more. But, how much do I need to earn exactly to be able to spend lavishly?

However, for an average person, the fact is there is NEVER enough money for you to spend freely.

The habit of careless spending and inadequate planning on income and expenses will lead to no or little savings. I personally felt that no one should be judging on how others spend their money. But the truth is your financial health is important too, even when early retirement is not part of your career plan.

Below are some little tips that I have been using for my financial planning.

1. Establish your financial goal

It is easy to set your goal to become rich or a millionaire one day, but definitely difficult to achieve them without any action taken. Remember, only the one who takes real action can achieve what they aspire to be. For myself, my key long-term goal is to be financially independent by 2030. But how?

So, to have a bird-eye view on how distant my goal is, I first tabulated my current net worth, which will be further explained in point 2 below.

I started asking myself several specific questions which are directly attributable to my ultimate goal. What portion of my salary I should be saving? Is saving more than 50% of my salary achievable? Are all my monthly fixed costs essential? Do I need these subscriptions? These are the questions that you need to keep in mind when setting your goal. And, you should always remember to stay on track with your NUMBER 1 GOAL.

2. Net worth overview

In fact, what is net worth? It basically implies a person’s amount of money accumulated till date. You could first sum up all your assets such as bank accounts, fixed deposits, retirement funds, insurance, commodity or real estates. Then subtract the loan/mortgage, credit cards and other personal liabilities. Forget about your iPhone, MacBook or any other depreciating items, unless you want to sell it at market value right now.

By knowing how much you exactly have, you are able to know your current financial position. You are an accountant for yourself too. And it is the most important job that one shouldn’t be taken for granted.

3. Have your own monthly budget

You need to know where your money goes, in other words, to keep track all your expenses. Every time when you spend a single dollar, you question yourself whether these items are essential. I’m sure everyone has something in mind in the cases where they purchased something based on excitement or intuition, but later it was left unused (or forgotten).

By understanding your needs and wants, you will set a better monthly budget for yourself. Everyone has different spending cultures. That’s why everyone should have their own customized budget to avoid OVERSPENDING, and at the same time you get to enjoy the happiness from spending within your means! Don’t push yourself to have a small spending budget and live miserably. Most importantly is to enjoy the process of achieving what you planned for; and in the meantime, you are able to build your wealth!

4. Focus on your number 1 goal

To be honest, I was a person who earns to spend. I was satisfied with this situation until one day I realized that by saving and investing, I would be able to retire much earlier than the current retirement age. Most importantly, I would not need to bother about my 9-5 career or stress over my boss’s WhatsApp messages (after working hour).

Hence, first thing I decided to change was my spending habit which was the most difficult part. Habits are deeply ingrained in us and hence it would be effortless for us to spend without even realizing it. That’s why I am working on it now to change my mindset because I know bad habit destroys my life. (sorry it is exaggerating but you get my point XD)

Eventually, it returns to the question, “what do you want to achieve in your life?”. After all, this is your life.

To be a better version of your current self - by Ms. Hotcup

#investing #saving #goal