Broadly speaking the types of expenditure can be divided into four sections, namely the obligation to pay debts, expenses such as routine household expenses, electricity, telephone, etc., investment and personal expenditure.
The amount of the obligation to pay the debt (repayments) should not exceed 30 percent of our total revenue. And this is the first priority must be placed on the expenditure side.
Defer payment of debt obligations will only lead to the creation of new debt opportunities in the future that have a higher interest rate. The second priority is to manage expenditures in the regular expenditure.
Must be clearly distinguished between routine expenditure and personal expenses. Routine expenditure is the kind of expenditures that absolutely must be done to support our productive activity, could not be saved without degrading the quality of life and can not be avoided, while personal spending is the kind of expenditures that must be sacrificed if there is a decline in income.
Routine expenditure must be maintained in the range of 50 percent of our total revenue. When the routine expenditure has exceeded the threshold of 60 percent of our total revenue, then we do not have the opportunity to invest.
As a result we will lose the opportunity to improve the quality of life in the future. So when a routine expenditures are nearing the threshold, we must work even harder for us to increase total revenue.
Investment must also be a priority in the allocation of “expense” we. This investment is useful to improve our quality of life in the future. Investments will acquire assets that we have and be a source of passive income.
Investment culture should be done early start, how kecilpun our revenues. The amount of the allocation “expense” for the minimum investment is 10 percent of our total revenue. In order for this condition is reached, the allocation of investment rather than from the rest of our income after deducting the expenses, but had been allocated as soon as we receive revenue.
Please understand that investing is not the same as saving, because saving only provides asset growth rate is relatively very small. The younger the age of our greater weight (percentage) our investment in investment instruments that can provide a high return rate to support our financial future.
Personal spending is the only type of expenditure which may and should be sacrificed when there is an increase the percentage of expenditures in the three headings of other expenditures. Delays and reductions in private expenditure would not reduce the quality of our lives and not harm our financial condition in future.
This is clearly different if we reduced our expenditure allocations to the three headings of the first expenditure priority. One way to control the personal expenses is to open a special account at a bank that is used to support these personal expenses and the account contained only the remainder of our previous month’s revenue after deducting the total expenditure is our third priority expense items that should not be inviolable.
This special account used to fund personal expenses so as not to undermine the three headings of expenditure priorities. With the existence of a special account, then we also did not bother to calculate the allocation of personal expenses that may be performed.
Once we fix our financial situation then we should enter the fourth step, which is planning a short-term financial goals and our long-term. In determining the short-term financial goals and long-term financial goals should be clearly outlined to be achieved and the range of time to achieve it.
One of the most decisive factor of success in achieving financial goals is the commitment and order us to obey pre-determined strategy. Financial planner professional from the banking world can be engaged to organize our financial goals.
Hopefully, this paper provides inspiration for us to rearrange and improve our personal finances. Happy investing.