It is important that you gauge how much you are spending. This is because in order to get an estimation on how much you are saving for the month or for the year itself, you will need to have a control on this.
Here is a scenario. A father supporting a wife and 4 children is trying to control his family’s expenditure and saving up at the same time. He wants to save more, but doesn’t know where to start. There seems to be lots of things to save and spend; the children education, the household chores and many more. Even though he is not earning much, he finds that with a strategy, he will be able to save. Therefore, he needs to look at the aspect of how much he and his family are spending first.
With that scenario in mind, the breakdown has to start from the most important spending of all. Draw up a budget plan and target the areas in which money is spent more on. By studying the different patterns of spending habits, one is able to plan for more in future. That includes holiday vacations, education, retirement fund and family emergency fund. In this modern world, illnesses are rampant and one has to start saving up early. That’s why it is very important to take note of all these details, studying the habits of spending and then to work on it.
To buy a new car or planning to move to a bigger apartment or house needs some kind of financial planning as well. The calculations of investing money to buy these things need to be tallied off with the issue of spending. For instance, to rent an apartment in a downtown area will cost about $800-$900 or more per month. And with a salary of 3-4k, after paying off the rent and paying the monthly car installment and bills, one is left with the balance bit to save.
Funds for other expenditures will also need to be put aside in order for one to realize how much he or she is able to save with what is left at month’s end. Even with a high salary, if one is not able to plan well and recognize how much he/she is spending, then that would defeat the purpose of trying to improve their financial situation. There is a high chance that money would go down the drain and still, the person is at a loss on how their budgeting have been so far.
Therefore, the need to realize the importance of how much one is spending is very important. It is the start of many things possible and ongoing, to improve the quality of life.