Financial freedom is more than just accruing enough money for retirement; it means you have granted yourself the financial freedom to enjoy your life in a manner that brings you satisfaction. With some simplified steps, you can put yourself in control.
At Financial Fitness for Life, we are big proponents of the 50/30/20 budget that has been popularized in many forms of media. We have tweaked it slightly to be, what we consider, a better allocation of your financial resources. The purpose of proper budgeting is to help you identify whether or not you are maximizing your income potential. It helps you make more informed decisions regarding personal finances and increase your savings rates. To start conquering your personal finances:
- First, access your income and track your spending. Where are the dollars going? This simple task will help you see where your spending habits need to improve.
- Next, develop a plan to refine your spending, to follow a plan for prioritizing your hard-earned dollars. This may help you free up some cash and allow you to save. Let’s face it, unexpected expenses happen! Financial needs arise that may not have been planned for in your budget. Saving is an ongoing goal.
Having money isn’t the key to happiness, having control over your life and finances is. Our simple budget worksheet below can help you put into perspective how you may want to prioritize your budget:
- 50% of your net income, after taxes, should be dedicated to needs. These are things that you can not live without, such as food and a home.
- 30% should go towards savings (emergency, retirement, or additional investing) and paying down debt. Keep in mind that savings are a long-term game.
- 20% of your net income, again, after taxes, may go towards your wants. These are things that would be a minor inconvenience if you did not have them but will not affect your survivability. For example, you may enjoy having cable or satellite TV, but you could survive without it.
Dakota Warnken, CRPC
Lead Education Consultant