Question

In 200-300 words each respond to the following.

1. Describe the three benefits of the following principle: “Spend less than you earn”

2. Lost and describe at least three steps you can take your personal finance to better control your spending and capitalize on these benefits.

Answer 1

1. Benefits of Spending less than what we earn.

• Precautionary Motive - Spending less money provides a buffer for unexpected cash needs like accidents or functions
• Helps may not be in debt - As we have cash in our hand for unexpected expenditures we will not be in debt.
• Free from Financial stress - We have time to do things that we have actually enjoy doing in our spare time. It can be easy to focus on items that we want to do our best to free ourselves from the apprehension, and concentration on looking for items that we need.   

2. Steps to control spending our personal finance

• Prepare a Budget

Making and sticking to a budget every month is what is going to help you get out of debt and stay out of debt. When you make your budget , you need to make sure your basic needs are covered. As identification of necessities offer an opportunity to cut back on the extras.

• Make your budget work for you

  Now we are ready to create a monthly spending plan for everything what we need from basic also. This is also called a Zero Based Budget. This means your income minus your expenses needs to equal zero and you have told every single hard- earned dollar where to go. Just rememnber it's a working budget. You have to keep coming back to it in order to stay on track.

If this is your first budget, you will want to give yourself grace. It takes a few months to make your budget work for you But if you are an expert, take another look through your monthly expenses for other ways to trim your spending.

• 3. Challenge yourself to reach your new goals.

Put your willpower to the test by buying just the bare necessities for one month. You will also be able to identify the things you don't necessarily need. The key to stop your over spending is creating better money habits and being intentional with what you spend your money on.

You can supplement your income with investments and freelance work. For example, you can begin by freelancing. Everyone has something that they are good at that they can capitalise on. Take the money from any freelance work you do (it doesn't have to be all of it) and being investing in something. Through these ways we can capitalise our money and can reduce overspending.