Invest before you spend: Your monthly consumption should be equal to your income (net of all taxes) minus your monthly investments. Regular investment every month grows your wealth, so your money is making money for you.
Have a constant stream of income: Being good with money means having a regular stream of income, either from your workplace or from your investments. Knowing how much you take home every month allows you to plan how much you’ll invest and how much you can consume.
Have a budget: Once you know how much you earn and how much you invest, what is left is for your consumption. Budget this consumption amount. Planning and tracking your expenditure for regular and unplanned costs is key to sustaining your lifestyle.
Treat yourself: Don’t accumulate for the sake of accumulation. It’s important to be kind to yourself, and take that holiday without incurring any debt. Try to tie the treats to achieving a goal or a milestone, so that it’s not just because it’s the holiday season.
Resist peer pressure: As you treat yourself occasionally, resist the pressure to buy things you can’t afford or don’t need but end up buying anyway just because your peers are doing it. Financial security requires emotional maturity to live within your means.
Consistently pay down your debt: Debt is not bad, especially if applied to investments such as education or buying a house – that is good debt. Bad debts are those that don’t help you build assets or those that are not part of your goals.
Emergency money: As with everything in life, emergencies come up, whether it be health problems or family emergencies, among others. Financial planning involves having a fund stored away for the financial surprises that life throws at you, with at least 3 to 6 months of monthly expenses in short-term investments.
Retirement planning: A key financial goal is planning toward retirement, no matter what age you are. Start by considering the lifestyle you want when you retire, how much it will cost per month (even an estimate), add for any unplanned surprises, and work backward towards investing every month to reach your goal.
Periodic financial health checkups: Financial planning is the journey toward financial security. Every journey needs a periodic checkup and assessment. Goals change as life progresses, and so does your situation in terms of income, health, and family.
Continuous financial education, learning, and research: All financial decisions should be based on research and learning. Financial education allows you to set realistic goals for yourself, with timelines that are achievable.
