Back to the Basics!

Author

Finance Girlie
February 05, 2024

Assalamu Alaikum girlie,

You’re reading the a self-proclaimed “masterpiece” from the go-to-hub for personal finance & psychology for Muslim women.

Today, we’re talking about the the foundation that form our financial well-being. Giving Insights and tips on my top 5 PF topics!

1. Understanding Your Money Tendencies:

Insight 1: Awareness is Key. 

  • Ever caught yourself wondering where all your money went by the end of the month? Understanding your money tendencies is the first step. Are you a spender or a saver? Are you one for the spread sheets or do you spend like your money’s being blown by the wind?

Insight 2: Emotional Spending. 

  • Emotions can play a significant role in our financial decisions. Identify triggers that lead to emotional spending. Whether it's stress, boredom, or joy, being aware helps you curb impulsive choices.

    Tips:

    a. Create a Money Diary:

    • Keep track of your daily expenses to spot patterns in your spending behavior.

    b. Pause Before Purchasing:

    • Implement a "24-hour rule" for non-essential purchases. This gives you time to evaluate whether it's a want or a need.

2. The Basics of Budgeting:

Insight 1: Start Simple 

  • Budgeting doesn't have to be complex. Begin with a straightforward budget that includes your income, fixed expenses, and discretionary spending. Keep it simple to stay consistent.

Insight 2: Track Your Progress 

  • Regularly review your budget and adjust as needed. Track your spending against your budget to identify areas where you can cut back or allocate more funds.

    Tips:

    a. Use a Zero-Based Budget:

    • Write down your estimated income for a given month, assign every dollar a job; eg for savings, fun money, rent, miscellaneous, charity, etc.

    b. Automate Savings:

    • Set up automatic transfers to your savings account to make saving a seamless habit.

3. Emergency Funds:

Insight 1: Life is Unpredictable 

  • Unexpected expenses can pop up at any time. Having an emergency fund provides a financial safety net, ensuring you're prepared for life's surprises.

Insight 2: Determine Your Comfort Zone 

  • Consider your lifestyle and job stability when deciding on the size of your emergency fund. It's not about a one-size-fits-all approach; it's about what makes you feel secure.

  • Tips:

    a. Start Small, Grow Over Time:

    • Begin with a goal of saving one month's worth of expenses, then gradually increase to cover three to six months.

    b. Separate Your Emergency Fund:

    • Keep your emergency fund in a separate account to avoid accidental spending.

4. Investing:

Insight 1: Time is Your Buddy 

  • Investing is a long-term game. The earlier you start, the more time your money has to grow. Patience is a powerful ally in the world of investing.

Insight 2: Diversification Matters 

  • Spread your investments across different asset classes to reduce risk. Diversification helps protect your portfolio from market fluctuations.

  • Tips:

    a. Start Small

    • Just like with savings, time is the most important thing in investing. It’s better to start small and early than to delay getting into the game!

    b. Educate Yourself:

    • Invest time in learning about different investment options and strategies. Meet with a financial advisor or your employer retirement plan specialist (if applicable)

5. Eliminating Debt:

Insight 1: Gather the Information

  • Here’s a secret: Ignoring debt doesn’t make it go away. As uncomfortable as it may be, pull your credit report and view all your debts. Take note of the total debt amount, interest rate (if applicable), minimum payment, etc.

Insight 2: Snowball vs. Avalanche Method 

  • Choose a debt repayment strategy that suits your personality. The snowball method tackles small debts first for quick wins, while the avalanche method prioritizes high-interest debts for cost efficiency. (btw, interest isn’t permissible- it’s some people’s reality so we have to face it)

Tips:

  1. Negotiate Terms & Payments:

    • Contact creditors to negotiate the terms or monthly payments of the loan if possible, making it easier to pay off debts. (Paying consistently will help you better negotiate)

  2. Celebrate Milestones:

    • Celebrate each debt payoff milestone to stay motivated on your journey to financial freedom.

In the upcoming emails, we will delve deeper into each of these. This is just the tip of the financial iceberg.

Until next time,

Fatimah 🌼

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