MJ Gonzales │ExecutiveChronicles.com
To work because you want to make a living can be both motiving and frustrating. If you’re in the latter side, possibly it’s because you’re living paycheck-to-paycheck to sustain your growing monthly expenses. If you’re part of the rat race, do you think increasing your earnings from promotion and bonus can solve your problem? Financial experts shared building your financial or cash buffer is a great help to get out of the race and achieve your other aspirations.
Cash Buffer is like a small fraction of emergency fund and it something you can use to alleviate your paycheck-to-paycheck financial lifestyle. The first mission here is to build an amount of money that pays your monthly expenses next month- again, next month and not this month. In this way, you’re not only anticipating your expenses, but actually ahead and prepared to pay them.
In creating cash buffer, it is not only about getting a new source of income as it also entails monitoring your expenses and living frugally at least for few months. In fact, the others’ principle about cash buffer is “living on last month’s income.” Of course it’s good that you can cover more than a month of expenses ahead of time. If you can build cash buffer that can sustain three to six months that’s ideal in anticipation of extra bills or outlays.
There are many suggestions to build a financial buffer like by opening a separate bank account for it. However, a good rule of thumb for this is to focus on your “real” monthly expenses. Evaluate which ones that you’re oblige to pay and which you can live without. Who knows your expensive coffee everyday can make you a Php 5000 (around $106) poorer per month? Learn to budget and stick with your plan until you save for your buffer.
Meantime, don’t push yourself too hard to make a huge cash buffer quickly. Build it slowly by keeping what you save from the things you can cut out in your budget and extra pay you earn from your overtime. The keys are consistency and drive to have it. So let’s say your monthly obligation is Php 35,000 ($739.5) and you can keep Php5000 per month. If you start saving this December, by June 2016 (or the seventh month) you have already 35k to pay your bill for July. Then, you can use salary in July for your expenses in August.
Arguably, most employed (from rank-and-file to executives) are discontented and stressed in their jobs due to lack of growth, office politics or terror bosses. Unfortunately, what’s holding them back to take further actions is possibly not the stiff competition in the job market, but rather their own financial problems. It also makes sense if they give up their dreams to own a business because they can’t afford to stop earning. With a cash buffer, you can be stress-free and possibly can start to move out from the rat race.