5 factors that should decide your spending plan. In money Economics, the quantity theory of money states that the general price level of goods and services is directly proportional to the amount of money in circulation, thus your spending plan takes effect on this dynamics.
Despite not being categorically true according to Keynessian economics, it still has a direct or relative impact on how you choose to spend your money.
Human wants are insatiable, the ability to spend your earnings is categorized on your taste and choice, but spending plan is bent on helping you make the right decision to attain your financial goals.
In this guide you will learn to manage your personal finance according to order of priority, abound is key economic factors that must decide your spending plan. A good spending plan will to a great extent decide/determine financial success.
Definition of spending plan:This is a simple strategy that enables one to make good use of his/her money towards reaching financial goals. A spending plan can help you live within your means, which means living a lifestyle that you can afford not spending faster than you can earn as well not borrowing more money than you can afford to repay.
Often times, there has been argument weather there’s a distinct difference between spending plan and budget. Spending plan is not too far from budget, what makes the difference is the perception of your mind, principles and intents. Spending plan is a more conscious and detailed approach to your finance. Budget comprises all of the departments for a period of accounting projections or program.
In a lighter and personal language, I refer to spending plan as needs while budget takes the place of wants, as detailed as that. Why is spending plan an important aspect of financial planning, the answer is an open secret, simply to meet financial goals be that long or short term.
The following factors are very key to financial/spending plan.
1 Health Scheme: Truth be told, health is wealth and this can never be misconstrued in any way. You are expected to make provision for your health plan as such should form the fundamental of your perceived spending plan. Majority who stay in Europe and America may have little struggle with this unlike counterparts in Africa.
We have scenarios where people die carelessly because they were unable to meet hospital demands, as I speak, people are dying every minute in Africa as a result of poor health plan. The few hospitals available lack good health facilities like drugs and equipment, little wonders the so called leaders are flown abroad for medical care in event of ordinary headache or malaria, despite announcing huge sum of funds as budget for health sector annually.
Save some money for your health, it may not have occurred to you prior now, but it indeed worth the stress if you actually value your life.
2. Retirement Plan: The mention of retirement should not make you go jittery at all, retirement is meant at having your deserved rest after fruitful years of active labor, but the question is, did you care to make hays while sun shines? If your answer is in the affirmative good, but if it’s not you may need to start doing something about that aggressively. Apportion a reasonable amount of your earnings towards retirement savings, there should not be a distraction to this.
3. Education: Making provision for education can not be a bad idea at all, it should form the focal hub of your financial plan.
Borrowing funds to acquire education is not the way to go, education must be constructed in your spending plan so long you’re earning. No matter how little, neglecting education in your spending plan indicates a great disservice to one’s self.
Mortgage: It pays to have a house of your own possibly in your active working years. Strive to acquire at least a piece of land , if you can’t save to achieve this take a salary loan, get a piece of land than erect a structure gradually before retirement.
Begin a plan to acquire a home and say good bye to tenancy, it really worth going through, the earlier the better.
Debt repayment: Regain your relative peace of mind by settling your debt with a reasonable provision in your spending plan.
The longer it stays, interest rate is bound to accumulate, so why not increase your repayment plan to pay off soonest. A good spending plan should consider loan/debt repayment at the center of its decision making.
Conclusion: These are must personal finance factors that ordinarily should be at the center of your financial decision if your money goals are anything to achieve.
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Raphael is a seasoned and dynamic writer, with interest in Banking, personal finance, entrepreneurial development. A councillor and motivational speaker.