Financial Intelligence How to Attain Financial Freedom
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Financial Intelligence How to Attain Financial Freedom

Published by: Michael Rey (16)
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How often do you hear people saying “my monthly salary is not sufficient”; “I have no idea where my salary went”, “I could not save money when I was getting Rs.5k per month and today, even after getting Rs.50k per month, I am still not in a position to put aside some money for emergencies or unexpected events”? These laments can be heard throughout the middle class families and even from people who earn a good income. If you never spoke such words, you are either super rich or you are financially intelligent. Financial intelligence is necessary for people of all income levels to live comfortably.
    If you wish financial freedom, the first and the most important thing you need to do is to be aware of your spending. Analyzing your spending is very important in everyone’s life as it helps to properly understand your financial situation. Only after that any meaningful financial planning goals can be established.

Analyzing your spending is important because:
•It assists you in doing proper allocation of your earnings. Typically after analyzing their spending, most people are shocked by seeing their spending on certain things.

•It makes you spend money wisely and stops you from wasting money on useless things. We generally are likely to spend more while shopping for food or other groceries, leisure shopping or shopping for non-essentials or while dining out etc.

•It assists you in achieving your financial goals faster. You may wish to build a debt free future or buy your dream house in the future.

When it comes to doing an analysis of spending, many people normally try to make excuses as they think that it is a tedious and useless exercise. They may also think that “our income is too small to do such an exercise” and/or “the problem is lack of earnings not our spending”. The painful thing is that they start complaining even before they try it.

Moreover, many people don’t know how to start, as this is not exactly told in school/college syllabus. In order to understand your financial situation, you should be aware of your income, all your expenses and how to categorize and record them.

Remember, without sitting down and tracking your income and your total expenses, you will not be able to see your spending pattern and cannot decide on what changes you need to do in your spending habits in order to succeed financially.

Recollect all the expenses that you make and prepare a list of expenses. Expenses can be rent, newspaper bill, phone bill, Internet bill, food, loans, entertainment, transportation etc.

Categorize the expenditure items into fixed, periodic, variable, discretionary and contingency expenses.

Fixed expenses are not avoidable and will be the same for few months/years. You can predict these expenses every month. Ex: Rent, paper bill, chits, loan payments, insurance, etc.

Variable expenses will be changing and you can control them. Ex: Electricity bill, phone bill (post-paid), books, food, transportation charges, etc.

Periodic expenses are not paid on a regular monthly basis. Though they may fluctuate month to month but over a longer period of time they are predictable. Birthday gifts, clothes, medicines etc., are few examples.

Discretionary expenses are non-essential. Entertainment, movies, vacation, going out to eat etc., are few examples.

Contingency expenses are not expected. These expenses cannot be planned. It may happen or may not happen. Ex: marriage, hospital expenses, some family expenses, car repairs etc.

Now that you know how to organize the different types of expenses, start calculating your expenses to see your spending pattern. Make appropriate changes in your spending habits to succeed financially.

Michael Rey - About the Author:

The personal financial planning section at provides unbiased information to guide you to make the right decisions with your personal finances. Here, you can get tips on various topics right from how to save money to where to invest your savings.

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