This lesson changed my mindset on saving and I thought to myself..” why not share on the blog?”. Its an excerpt from a very intriguing book;
Smart Money Lesson
One of the biggest issues people complain about when it comes to their money is not knowing how to save or budget. People associate the word “budget” with scarcity or a reduction in station of life. Therefore, “budget” is a word they come to resent. The reality is, a budget is something that tells you how to allocate your resources and it should reflect what you value. So if I looked at your bank statement, would it reflect that you are spending on the things you love or will it be a reflection that you don’t spend intentionally and allow your money to be pulled in different directions?
The reason most people live paycheque to paycheque is because they don’t have a full understanding of what the income can support. Money in the bank equal to spending. It doesn’t matter the amount you earn monthly, your resources are limited and consumption tends to rise with income, so it’s important to have a spending plan that takes that into consideration.
So here is the trick for guilt-free spending: the smart money budget! I know the idea of a budget makes people nervous, but it shouldn’t, especially if it’s easy and reflects the things you love. The smart money budget is a way of allocating your resources.
First, divide your income into three parts:
- Long-term financial goal
- Short-term financial goal
- Living expenses
Long-term financial goal (LFG): At a minimum of twenty percent of your income, it represent a proportion set aside towards improving your net worth say buying asset that will improve with an income. Good examples is buy land, property or a stock portfolio.
Short-term financial goal (SFG): The proportion of your income set aside for treats- a channel bag, an iPhone or going on holiday, whatever tickle your fancy.
Living expenses: Your monthly contribution to your rent, health insurance, cable, petrol etc.
Here is example of how to go about it with two salaries rate.
SFG (10%) =N300,000
Living expenses (70%)=N2, 100.000
LFG (20%) =N120,000
SFG (10%) =N60,000
Living expenses (70%) =N420,000
It’s better you have three accounts so you can save properly but if you can be prudent with your spending then one account is okay. Still wondering the the name of the book?…It’s called THE SMART MONEY WOMAN.
Take this lesson seriously and your life will Change for Good.
Until next time it’s all love from here ❤️