The reason behind financial sanity is not as a result of how much you earn as income or salary from business or the workplace. It has a lot to do with your lifestyle and approach to personal finance.
Financial sanity is actually talking about how healthy your finance can be based on your approach to finance usage.
When we refer to personal finance, you are not much concerned about how much you get as an individual. But, how efficient you can be in managing your income flow.
It also extends to knowing how you can plan your finances for your future.
Your attitude towards expenditures and money management has a lot to do with your financial sanity.
Having good financial sanity helps us to acquire good financial stability and growth.
It is one thing to acquire wealth, it is another thing to guide what you have acquired.
It is important that you abide by some rules that will keep you financially healthy and stable.
It is your Networth that determines your financial state. Even in any country, the government tries as much as possible to calculate how much they generate as revenue (Networth) to properly and efficiently plan how their spending would look like.
It is easy to calculate what you make annually, by taking notes of your daily income. When this is well done, you can be able to ascertain how much you have made In a year.
Why is this important?
This is so important because what you get influences how you should spend your money.
You are not supposed to live above your means. Know what you buy and why you need them.
Unwise spending can ruin your finance. It is emphatically said that you should know your worth.
It is Paramount that you consciously budget your income vs. expenses, so you can spend within your means and manage lifestyle expectations.
We all should set a limit to our expenditures based on our worth.
This is another important factor and rule to maintaining a good financial state.
We all want a lot of stuff. You are passing through a boutique, and you see that beautiful pair of shoes, and you feel like you want it. Or maybe some other times, you are passing through the same boutique and you see a beautiful dress neatly displayed, and you wish to buy them.
Going for what we want is good, but not a necessity. Humans want a lot of stuff. No matter how much you try, you can not satisfy your wants. On this note, it is very important that you scale yourself.
Differentiating between your wants and needs helps you to balance your expenditures.
Wants are optional while needs are a necessity. Needs come before wants.
Strategize on how to channel your income. Know the percentage that is meant for savings, expenses, and investment.
For example, If you need a normal affordable car for work and for taking the kids to school, and you also have a mere desire for a clean Honda SUV, your desire for a luxurious Honda SUV is actually a want and not a need. In practical terms, what you need at the moment is an affordable car for your job and for taking your kids to school.
Your needs should get top priority in your budget. Only after your needs have been met should you allocate any discretionary income toward wants. And again, if you do have money left over each week or each month after paying for the things you need, you don’t have to spend it all.
The saving before spending rule is a good start for a healthy financial habit. Developing the habit of saving a small ratio of whatsoever you get from any input, is a good habit. It is the little savings that accumulate to something huge in the future.
Do not neglect the least ratio of savings as it can come to your rescue in the future, who knows.
Save for now, save for tomorrow, and possibly save for retirement. One huge mistake a lot of people make is waiting till they retire before they will start making retirement plans. Your retirement plans start even while you were still very much young at your civil service.
The worst tragedy is not having anything to show forth at the end of retirement.
Your retirement savings should be guided by the following;
Emergency funds are good lifesavers.
Every individual, firm, and organization that must keep running, should also keep an emergency fund.
It is the best rescue when every hope fails. Consciously create funds for emergencies. Life emergencies are inevitable, so, therefore, to avoid completely breaking down at a slight financial shock, build funds that will attend to your emergency need.
Even if you are not into business, maybe as a student, it is a necessity that you create an emergency fund that will attend to your urgent needs at school. I can recall several times I was rescued from pressing school needs just by my emergency savings.
If you have not created one now, go ahead and do so because you will be glad you did.