Why Should You Keep a Household Budget in Asset Building?
When building assets, household management is something you can’t avoid. But managing your household finances, calculating expenses, and keeping a budget can be quite a hassle, right?
Do you ever think, “If only I had been born in a prosperous era, I wouldn’t need to keep a budget”?
It’s true that during the period of rapid economic growth, you didn’t really need to focus on asset building; simply depositing money in the bank was enough to earn interest and grow your wealth.
However, savings require household management. To cut unnecessary expenses and create surplus funds, you need to understand exactly how much you’re spending and on what.
By now, I hope you understand the importance of household management. However, before you start managing your finances, some preparation is necessary.
Preparation for Starting Household Management:
- How much money will you need in the future?
- How much do you need to save monthly to reach that financial goal?
The details will vary depending on your personal goals and current financial situation, but let’s proceed with the assumption that you aim to build an asset base of $500,000 to $800,000 by age 65.
According to statistical data, households headed by individuals aged 65 or older currently spend about $3,600 per month on living expenses. If we take pensions into account and assume you need $30,000 annually to cover the difference in living expenses, then to reach $800,000 by age 65, with a 6% annual return on your savings, you would need to save approximately $300 per month starting at age 20, $500 per month starting at age 30, or $750 per month starting at age 35.