Calculating a personal budget is of crucial importance for financial independence, as it allows you to understand the process of operating money. Fedosov et al. (2021) state that “long-term budget planning is especially important in conditions of high financial dependence” (p. 1). It is clear from my budget table that my income is well enough to pay my bills, as it covers all expenses. Thus, it is safe to say that I live within y means and am entirely independent of my family. The savings category constitutes my emergency fund: every month, I put $8000 into my bank account to save money both for any unexpected expenses and for future use. This money would also serve as retirement savings, and I plan to slowly increase the amount of money I save up to at least $10,000; as for now, $8000 is clearly not enough for retirement. Seeing that, with all the expenses counted, I still have more than enough money; I can start supporting my family and donate to charity.
My first step to start saving for the future would be to set aside a fixed percentage of income every month. I will create a separate account or debit card where I can transfer funds from my salary, part-time job, advance payment, or business profits. Moreover, to avoid the temptation to use this money or cancel my monthly contribution, I will set up automatic deductions and open a bank account that does not allow premature withdrawal.
From the available investment tools, I would consider stock investing first. However, before buying shares, it is important to study the performance and performance of the company, read analytics, and make a probable forecast. Additionally, after the purchase, I will have to study statistics and stock reports and follow the charts throughout the day. Still, stock investments would be my first choice of using spare money. Another less risky way I am also willing to try would be to buy index funds rather than individual stocks of companies. In fact, these are ready-made portfolios of securities – for example, shares of the largest IT companies in the United States or companies with the largest capitalization. As a result, the price of the index will follow the average price of all securities included in it. At the same time, I will not need to monitor constantly how things are going in the market, as with stocks. Finally, to secure my finances, I will diversify my investments: I will use different investment tools, carefully research various strategies, and combine them in complex systems. My investment portfolio will be differentiated by many variables, such as tools, industries, companies, and even countries, to provide better insight into the stock market. This way, I will partially insure myself against related losses.
In my budget table, I have a particular expense for credit payment. I will loan $26,000 for 36 months from the bank to buy a car, which would be more profitable than spending time and money on public transportation. My income allows me to pay the loan with ease. However, in the future, I will try to refrain from taking loans and simply save up the needed amount. Still, if I would ever need to loan money, I would first research the offers from the banks and choose the one that would fit me best.
Reference
Fedosov, V., Morunova, G., Ivanova, N., & Kankulova, M. (2021). Long-term budget planning in the context of globalization and its socio-economic significance. SHS Web of Conferences, 92, 03009.