The Pursuit: Budgeting and Saving

For this first module, we’ll tackle Budgeting and Saving. They sound simple, but these two practices are foundational for financial stability and are the first step in reaching broader monetary goals.

Importance of Budgeting

Budgeting is essential for financial health. It allows you to create the short and long-term plans you need to begin reaching your financial goals while ensuring you can meet your financial needs.

Budgeting helps you:

• Take control of your finances.
• Know where you are spending your money to alleviate anxiety.
• Ensure proper savings to prepare for future needs or emergencies.
• Plan for and reach financial goals.

Steps to Create a Budget

Saving: Key to Financial Security

Now that we’ve given a general overview of budgeting, it’s time to examine your savings. There are three key types of savings, as mentioned above.

1. Emergency Funds: This is a reserve of anywhere from a few months to half a year’s worth of expenses for unexpected events like job loss or medical emergencies. This can be a large chunk of money, so don’t expect to be able to create this immediately, instead, start putting aside money early to build up this reserve so that it can be ready if you ever need it.
2. Short-Term Savings: These savings correlate to the short-term goals you chose earlier. The key here is to budget out on shorter time scales. These will typically be smaller deposits depending on the short-term goal.
3. Long-Term Savings: These are arguably the most essential savings for long-term financial stability as they correlate to your long-term goals, like education, home ownership, and retirement.

While these all technically fall under the category of savings, it can be useful to separate them when budgeting to increase transparency.

Here are some other useful savings tips:

Conclusion

By creating a solid budget with a sound understanding of savings, you’ve already put yourself in a better financial position than many others. You’ve organized expenses, set goals and planned for them, reduced anxiety by increasing clarity, and created a clearer vision for your future financial plans.

Next, we’ll explore the world of credit and how it can be properly leveraged to further help you meet your goals and achieve true financial freedom.