One important step to successful financial stewardship is to plan how much you need. This is call a budget.
If you have not already created a budget, can I invite you to take part in this 15 min activity. Follow me through and by the end of the post, you will have your budget before your eyes!
Get ready a notepad or an excel file. Do note that this will be an initial budget, as we continue to review, it will become sharper and more accurate!
Stage 1: Daily Expense Lets start simple. On Monday, you will be starting your week. Run through the day and think of how much you will be spending typically. Do not take into account monthly events such as topping up your ezlink card or paying for insurance.
My main daily expense is food! Very simple.You can see that I usually don’t spend money on dinner as I eat at home. This amount will fall under groceries which i consider a monthly expense.
Stage 2: Monthly Expenses
Now for the 2nd step. We add in expense which we pay on a monthly basis. You should think of expenses which you pay on a monthly basis. It can be your house mortgage, insurance, groceries, transportation. Think of everything you pay every month! You can use the example as a reference.
You will notice that I will include my daily expense which is food into my monthly expenses. All I need to do is to multiply it by 30 days. This, of course is an estimate.
Stage 3: Annual Expenses
Now for the final step. We will be adding in expenses that occurs within a year, but not every month. Just brainstorm and place whatever you can think of. It can be car servicing, road tax, house insurance, yearly tour! Here is an example:
There you go, in less than 15 min, you get an annual budget. This is the amount you need to survive yearly.
One aim is to first accumulate half of your yearly expenses in cash so that you can be sure you can survive for half a year in event of unforeseen circumstances.
Another aim is to create passive income to cover these expenses. To find out how to create passive income through stock investments, you can read our older posts or even better, join us for a free investing workshop.
To your dreams,
Mind Kinesis Research Team