by Alfredo M. Escalon Financial Advisor I Fisherman
The basic problem in handling my finances is that it has become a taboo to talk about my money. As we associate with the fact that having money is a sign of success, when we have problems we do not want to express them, do not seek help, do not know how to explain our situation, as it has become a problem that gives it.
Even people seeking help see that take two or three sessions to have all the financial problems.
The number 1 step to learn how to manage my money is knowing how much money each month story. This should be our wage bill minus discounts, which are the ISR, the AFP and the ISSS. This amount is the money available we have in the month for our living expenses. In addition to these revenues, we have our Christmas bonus and with our holiday, which divided by 12 gives us the monthly amount of this income.
The total amount is the money we have available every month. It is on this basis that we must make our budget.
Step number two is to know what I'm spending my money. You can not have financial freedom if you do not know where to go for our money. We must take the challenge of controlling the money and know what was spent. Sometimes you surprise us that is small expenses that we will much of our income. There is no way to have financial freedom if you do not know exactly how much money we spend and how much money.
Step number 3: the unexpected. Just as there are expenses that are daily, weekly, biweekly and monthly expenses are also there every two, three, six and 12 months. These expenses are often those that get us into trouble, we forget that we have to pay; when we have money left in the month it should be for these expenses, we spend it on other things.
The correct way to deal with these expenses is to identify what are, for example, maintaining my house, corrective and preventive maintenance of my car, holidays or trips, school tuition, gifts and so on.
We must add all these expenses and divide by the number of months that happen, that way I know how much money I have to save monthly to address them. You should save between 10% and 15% of your income to cope with these expenses. That is called provisioning.
Step 4 is to save for emergencies. Always in our lives things usually happen for which we do not plan. These are true emergencies. This requires creating an emergency fund that is at least two to six times the budget of monthly expenses. This is money that will allow us to cope with an accident or a job layoff.
My retirement money has to come out every month and is not negotiable, need to save between 5% and 10% of my income to retire quietly. There is a great chance to reach my retirement age so this should be a priority in my income.
If we keep between 20% and 25% of our income and learn to live with 75%, we will never have financial problems. Have financial freedom is 20% knowledge and 80% behavior.