09:07 12 September 2013
Your excitement over landing your first job and receiving your first pay check is indeed a cause for celebration. The first few months entitles you to savour the taste of financial independence which may include buying some new things, treating your family and friends out and pampering yourself after a long time of pinching pennies.
After things have settled, it may be time to give your far future some thought and start setting up a plan that could give you even more financial independence.
The first step to financial planning is to know how much money you make and how much of it you spend and on what. It is really quite a simple mathematical problem – income less expenses. The remainder will be your leftovers.
If you are left with a considerable amount of leftover, you will have to decide what to do with it. You can plan for saving it in bank, venture on some low risk investments or pay off long term debts ahead of time.
However, if there is hardly anything left, then you might have to take a harder look at your spending habits. Determine where your money goes and cut down on expenses that are not really necessary but based on whims such as impulsive purchases that turn out to be unnecessary or useless.
There is no small amount when it comes to saving. Starting with 10% savings without drawing from it can amount to a whopping amount after sometime. It is never too early or too late to save. The important thing is you have something saved up for real emergencies, your dreams or even retirement, most especially retirement.
If you endeavour to acquire a mortgage, make sure that mortgage payments do not exceed 30% of your income. Anything more than that can put you in a financial bind considering that there are other regular and emergency expenses that you have to provide for. As you improve your financial status, you can then consider paying a bigger amount to hasten the payment period of your loan which can realise for you some real savings.
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