Now that you have identified your life stage and money goals (click here if you haven’t), take the next step by figuring out how you will achieve them. This is where proper financial planning comes in.

Financial Planning is a PROCESS of managing one’s financial resources, accompanied by STRATEGIES, in accordance with your FINANCIAL GOALS– and it all starts with proper budgeting and saving.

Budgeting is making sure that your money is going where it should be. It simply means: income minus expenses equals your potential budget. If expenses turn out higher than income, then you need to make some changes on how you spend your money right away! You can do this by eliminating bad debt and through reducing, cutting, or postponing unnecessary expenses.

Saving refers to the act of putting aside money for basic needs or emergency situations. But to make it really effective, you must make saving a habit by doing it consistently and with purpose.

Here are some budgeting and saving tips that will create a strong foundation for planning your finances:

  1. Save at least 20% of your income.
  2. Create a fund you can use during emergencies, equivalent to six times of your monthly expenses.
  3. When you have extra savings, it’s time to invest!

Lesson 2 Exercises