Do you always experience a shortage of money at the end of the month? Your main problem is not your salary, but that you do not know how to plan your budget. Finally, we have to have enough money for all the essentials plus save money for the future.
How can you get financial freedom? Only after you start planning your budget.
For some reason, society believes that if a person doesn’t have a considerable amount of money, they don’t need special knowledge of money management. But I think the reality is the opposite! The less money you have, the more important it is to understand what each dollar was spent for and why. Although financial planning often causes negative emotions because it involves reducing and controlling expenses, it is the safest way to get out of debts and become more financially independent.
Don’t Put It Off
Those who think that tomorrow will be better are gravely mistaken.
This refers not only to budget planning but also to the intentions. We promise to do more workouts, choose more healthy products, get in bed early, etc., starting tomorrow. We usually plan to start from scratch, not today, but tomorrow, next week, or put it off later. But I’m sure that it’s essential to act and start planning your budget, right now, not tomorrow. Because if we postpone and continue to live the same way, there will be no result. Well-being, as well as achieving goals, is not a given. It requires decisive measures as well as precise control over incoming and outgoing cash flows. The sooner you start, the more success you will have!
Don’t Mess Around and Focus on The Main Points
According to the practice of financial planning habits, most families often plan their budget within one month, trying to ensure that money is enough for regular payments and urgent needs. But at the same time, they should not forget about long-term emergency savings and future expenses. Undoubtedly, many people want to manage their current expenses at an early stage. But it is equally important to build a foundation of financial well-being for the future by creating various targeted savings such as a savings account, savings for the future of a child, and others. By contributing to a private pension fund, life savings insurance, deposits, you will have a sustainable future.
10% For Unexpected Expenses
When making a business plan, business people usually include 10% for unexpected expenses because it’s simply impossible to foresee absolutely everything. The same principle should also be applied to personal budget planning. If all your future payments are planned to the last penny, the slightest deviation can lead to the collapse of a carefully planned budget and hinder your plans’ implementation.
How Not to Spend Everything at Once?
Another common mistake is recklessly spending money in the first days after your salary. We can even notice a particular pattern here: the more difficult the belt had to be tightened before the salary, the more you want to spend after receiving the money on the account. To prevent this, you should divide the funds remaining after the mandatory payments into equal parts. For greater security, you can even transfer the amount of money to a savings account.
Basic Principles of Budget Planning:
Income and expense accounting
You can only manage your finances effectively if you know exactly how much you earn and how much you spend. Income accounting is generally easy but takes some time to expense accounting procedures. But here comes modern technology to help you plan your budget quickly and accurately. For this purpose, you can use computer programs (for example, MS Excel), cloud services (like Google Docs), or apps for smartphones (for instance, Easy Home Finance, Spendee). Or it’s you can try to pay by a card as often as possible: in such case, the time-consuming account of expenses will be taken by the bank, and all purchases will be considered in the Internet bank and available in the budget planner.
Analysis
Once you have sorted out your income and expenses, you should conclude by answering the question if all costs are reasonable and whether the current situation is acceptable to you. Often, the analyzing process brings surprises because if you count in your mind, the spending amounts seem smaller, and most of the expenses are forgotten. Usually, small and seemingly insignificant expenses can make up a considerable amount at the end of the month.
Goals
If you see opportunities for improvement, you need to understand precisely what and how you will do the other way. You may want to deal with your accounts and pay off all your debts first. Once this problem is solved, you can safely take on the following goals: start saving for a larger purchase, save for a rainy day, or arrange a new loan.
PlanÂ
To achieve the goal, you will have to change something. “Extra” money in your wallet can appear in two ways:
– spend less
– make more money
The best way to start is by cutting expenses. But, as you know, they cannot be shortened endlessly. It is also essential to consider the possibility of getting supplement income.
Actions
When the plan is ready, start implementing it! Perhaps this is the most challenging step, as it requires specific actions, but believe me, it is worth it!
