"It's not your salary that makes you rich, it's your spending habits" - Charles Jaffe
I think before moving towards the first step of financial independence, it's better to understand the most basic concept of the financial world.
Now, We can say that we should maintain a balance between these 2 in life to become financially independent but without having most powerful instrument it isn't possible, Can you guess what?
"It takes money to make more money"
It's your Spending Habits & Money Management will decide wheather you will be successful
in financial independence or not. Let's checkout average spending by common men
from their income.
Total Monthly Income : 40000 Essential Items : -10000 EMI(Car, Home, Credit,Insurance) : -20000 Luxury : -3000 Savings : -5000 Other items : -2000 --------- 0The main intension to show this calculation is that people are so much engaged in the daily work that they don't know about their spending habits. Money comes and goes in no matter of time from their pocket, Think about yourself and find out in which category you are? 🤔
Now, you might think that our income amount is the root of all our problems. Having a very small amount of income how can we save or invest after all my expenses? you are right, Income is not directly in our hand but what is definitely in our hand is expenses.
Now, you might ask how to cut down expenses to save? I assume that you have done your analysis for your past few month's savings and expenses. So currently the calculation is to be Savings = Income - Expenditure but ideally it should be Expenditure = Income - Savings. If you follow this habit then in a short time you will have good amount of savings. Now, again you might have a question that how much I should save from my income? So Let's Checkout.
Now, You already have a list of your spending habits for the past 1-2 months try to categorize items in above mentioned rule. Try to cut down 5% from needs & wants categories and add that part of the money into your savings category. Try as much as you can cut down your expenses, better you reduce earlier sooner you will achieve your Financial Independence.
I know this is not very easy to suddenly change your lifestyle but believe me you can develop this habit overtime by practice and patience. In the next blog, I will explain smart goals and our enemy in investment.✌️😀