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Life is a series of events, some of which we can plan and some that we cannot. One has to prepare financially for all these events. As such, if someone is purchasing a car, he will need an insurance cover in Mauritius.
For e.g. people working will retire at some point in time. Events may include paying off debts, buying a house or a car, getting married, having a baby.
Someone may opt to contribute towards a retirement plan during the time he is working. If he has children, he may wish to opt for educational plans. Our needs, goals and priorities keep on changing as we grow older.
It is therefore important to plan our personal finances to meet goals and needs in life as well as coping with unexpected events.
Reflexe family learn about budet
It is important to differentiate between basic needs and goals in financial planning.
Our basic needs are the things that we cannot do without, e.g. water, shelter, food, clothing. We must ensure that we have money to pay for these things first.
We don’t only have basic needs. We also desire certain luxuries. These are things that we would like to have, but which we can do without, e.g. luxury foods, a nice watch or travelling abroad. We can buy these things if we can afford them but we need to pay for our priority needs first, e.g. choosing to pay a mortgage instead of having a holiday abroad.
Most of the time, basic and priority needs cannot be postponed as they are essential for living. Goals on the other hand can be personal or family oriented and must be managed according to their importance. For example the education of children.
The best way to take control of our finances is to do a budget. This is a simple tool that helps understand the money going in and out of your household.
A budget shows if we are spending more or less than we can afford. It enables someone to direct his money where it matters most, so he can stay on top of bills and start putting money towards his future goals.
Typically people think of a budget as being complicated and assume it means stopping to buy things they want. Used properly, a budget actually allows someone to achieve financial success so he can buy the things he wants and not suffer from the consequences of the expenses incurred.
Budgeting is the process of creating a plan to spend money. Someone’s budget will be different from anyone else’s. This is because his needs and wants might not be exactly the same as anyone else’s.
To draw a budget, one needs to consider his income stream and his expenses. To do so, he should choose a time period according to his needs and lifestyle – for example, a week, a fortnight or a month.
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Someone’s income stream may be money that he receives. This could include his income, his pension or social benefits, and any money he derives from investments.
Expenses may include regular payments such as your food, rent or home loan, phone and electricity bills and transport costs.
When someone draws a budget, he can spend his money more wisely and cover all basic needs without having the need to borrow. There may even be enough money left to save.
The money that one has after all his expenses can be used as savings. This money can be used for unexpected events or emergencies such as a car breakdown or medical emergency. Without savings, unexpected events can become large financial burdens.
Money can also be saved for expenses which are largely above one’s monthly income, e.g. purchasing an automobile, paying for a vacation or a wedding.
Furthermore, savings can also be used for the education of children, buying a house or starting a business.
The first step to achieving savings goal is to work out how much money one needs to save and how long it will take to save that amount.
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