How often do you visualize your success?
Income, Credit and spending behavior
Many people may equate a nice car, large income or new boat to a financially successful individual. However there are many individuals with fancy cars, big homes and extravagant luxurious items that are not in a great financial position. Spending behavior can be the defining factor of success:
As an example between an individual who earns $100,000 annually may not be as financially successful as an individual who earns $40,000 annually. A key contributor to financial success is related to your spending behavior, since the higher ($100,000) income earner may accumulate debts in the range of 40% of their monthly income while the lower income earner may accumulate 5% in debts. By Learning more about your Gross and total debts you will discover that the lower income earner in a position of financial success at a much greater pace than the higher income earner.
Both individuals have the capability to be financially successful yet it is imperative to ensure you have a good grasp of your spending habits and understand how to manage your finances and improving your credit score. There are many programs available to help you with your budget and finances, and since budgeting is premised upon your desire to remain informed about you and your families spending habits everyone will have a preferred way to monitor their finances and budget.
Budget for financial independence
As a quick start guide here are some key items to consider as you build out your desired solution to monitor spending behavior and budget:
- Incoming (determine monthly income)
Monthly income after tax from employment
Additional monthly income
Total Income Monthly Amount = $$$
Take the amount of hours in a given business day (8 hours x 5 days) 40 business hours divided by the total monthly income. Discover your projected hourly rate $ or perceived value.
- Expenses (determine your monthly expenses)
Vehicle cost (i.e. lease)
Vehicle maintenance cost
Credit card payments
Utility bills (i.e. Heat, Hydro, Water)
Housing cost (Mortgage or rent)
Extra Banking fees (i.e. small amount paid to use interac etc)
Child care (daycare, extra curricular)
Personal expenses (i.e. gym, spa, sports)
Vacation expense (i.e. consider one trip annually)
Misc (i.e. while at work; coffee, lunch)
Consumables ( Alcohol, Cleaning supplies)
Household maintenance (i.e. repairs, cleaning, laundry)
Total Expense Monthly Amount = $$$
Subtract the total Expense Monthly amount from your total Income amount: Determine how much you have remaining for your own personal financial freedom.
There are typically two options to help increase your monthly income; A – increase your income B; reduce your expenses. Since most individuals understand that additional income is typically derived from a employment, overtime, second job, self employment or income from investments, we will focus primarily on the expenses.
Increase your monthly income
Here are some general guidelines that can be used to help reduce your expenses and increase your monthly income:
– Contact Credit card companies and ask to reduce your interest rate
– Find out if another credit card company will offer a more attractive interest rate than what your are currently paying. (it is not advisable to hold several credit cards, since it becomes difficult to avoid accessing the funds made available to you.
– *Pay down credit cards paying the card with the highest interest rate down first, then work towards paying down the next card with highest interest rate.
-Always pay at least the amount owing in interest on each of your cards and focus on paying off the highest interest rate first ( *see above note)
– Never hold more than 45% of the amount owing on any credit card
– identify areas where you can reduce expenses – consumables, household maintenance, misc, vehicle costs, personal expenses, extra baking fees, hidden fees with utilities.
Once you have established a staring point for budgeting, your hourly rate and the amount you have available as excess funds per month you can then consider what option may be available to help create additional income.