#6 Budgeting: The Financial GPS to Navigate Your Road to Riches

Investing. Buying an Nvidia stock(NVDA) for USD $25, being patient, understanding the long game, then 4 years later selling it for USD $250. That’s one sure way to use investing as a mean to build financial wealth. But how do you make sure that with all your ongoing expenses and spending, at the end of each month you have the extra money to buy such investing instruments? The answer is budgeting.

Let's face it, life is like a road trip. And just like how you need a map to navigate through unfamiliar territory, you need a budget to navigate through your financial journey. A budget is a financial plan that helps you track your income and expenses. Without one you're driving blindfolded and it’s just a matter of time before you end up in an ugly crash. Having a budget is crucial, as it allows you to:

• Understand the flow, sources and timing of your income every month
• Identify your expenses &?spending
• Plan to put some part of your money aside for savings & investment
• Think & design your game plan for the future
• All the above to get you to the ultimate objective: To find the path to your financial goals

How do you start?

Creating a budget is actually a very simple task:

1. Determine your income: Calculate your monthly income from all sources, including your salary, freelance work and side hustles.
2. Track your expenses &?spending: Write down all your expenses, including rent/mortgage, groceries, transportation, utilities, entertainment, etc.
3. Categorize your expenses: Organize your expenses into categories such as housing, food, transportation, and entertainment. Make sure you label each of them with a “Need” or “Want” to get more clarity about your spending habits.
4. Set your goals: Decide how much you want to save and invest each month. Make sure your goals are realistic and achievable and you’re not setting yourself up to fail a couple months later.
5. Allocate your money: Allocate your income to your expenses, savings and investments. The split will eventually depend on criteria such as: the stage you are in, your ultimate goal, your investor profile, your debt balance, etc. However if you just randomly google this query, you will get a generic answer like: the recommended split is 50% for expenses, 30% for savings, and 20% for investments. Tread with caution around these tips.
6. Review and adjust: Review your budget regularly and make adjustments on the go. Life is unpredictable, and your budget should be flexible enough to accommodate unexpected expenses.

Once you have all the numbers in an excel, the real fun &?challenge begins. Now you can zoom in on each category and start pushing the numbers to the place you want them in: finding a side gig to increase monthly earnings, review and trim your expenses or optimize your investment to better fit your investor profile we talked about in the last article. Always have in mind that the end goal will redirect your path - your priorities and behaviour will change if you’re building an emergency fund, if you’re saving for a downpayment for your apartment or you are just dolar cost averaging on your favourite stock or a crypto.

In conclusion, budgeting is like the GPS of your financial journey. It helps you plan the route, stay on track and avoid pitfalls to reach your destination safely. By following the simple steps outlined above, you can start your journey towards financial stability and wealth. And remember - life is unpredictable, but with a budget you are one step closer to achieving your financial goals, while still prepared for the unexpected your life can throw at you. Happy budgeting and may the wealth be with you!