Building a budget
- The traditional budget starts with tracking expenses, getting rid of debt, and then building an emergency fund.
- But you can speed up the process by building a partial emergency fund. It will act as a buffer to replace the use of a credit card for emergencies.
- An emergency fund is used to prevent you from having to use your credit card for unexpected expenses.
- Once this buffer is in place, its time to eliminate or substitute unnecessary expenses. Instead of buying coffee from a coffee shop every day, invest in a coffee maker, and save more money long term.
- When you have completed downsizing, then only find new sources of income. This way, your added income will not be wasted.
- It is better to have no debt before you begin investing.
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"Making money is art and working is art and good business is the best art." ~ Andy Warhol
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Things To Do Before Focusing On Building Wealth
- Create a budget and stick to it
- Pay off your debt – especially high-interest credit card debt
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- After establishing an emergency fund and becoming debt-free, go all-in on building wealth!
The 50/15/5 rule for multiple financial goals
- 50% of your income goes toward essential expenses: rent, bills, minimum debt payments.
- 15% percent goes to retirement savings. They also suggest you increase this by 1% each year.
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An emergency savings fund buffer is vital for freelancers. It will help you to keep your head above water when your income fluctuates.
A zero-sum budget means living off last month's income alone. This can be done in the following way:
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