Managing Your Money
The ability to manage money properly has nothing to do with either cheeseparing or a strict limit on spending. This is just an awareness of their real capabilities and the planned, rather than spontaneous, fulfillment of their desires. There is a common belief that managing money is the privilege of very wealthy people. But in fact, financial well-being can be achieved even if your income is average. It is now, first of all, about confidence in the future and the possibility, sooner or later, to begin the life of a wealthy person.
Many believe that their financial situation will improve with the income increase only. But, if a person does not know how to manage the budget, it often turns out the opposite. With the growth of earnings, so do the demands. Moreover, as a rule, they are ahead of revenue growth. “Well, now I can afford it,” we think, spending money faster and faster. Thus, the gap between expenses and income is widening. The five principles are not only the result of the professional and personal experience, but also the result of communication with financiers, consultants.
Fact#1: Control income and expenses
Despite the banality of this principle, it is impossible to effectively manage your own money without understanding your real financial situation. Therefore, we begin to arrange our own finances by filling in the expenses and income. For this, financial advisers from First Premier Bank recommend you to record your expenses during the month. In this case, the “paper” budget will correspond to reality as much as possible. But if there is no habit of registering each of your purchases, then, as a rule, expenses will be forgotten. Therefore, we would recommend first to make up the budget “by eye”. Write down all possible expenses, grouping them according to some criteria – “repayment of loans”, “communal apartment”, “food”, “entertainment”, “everyday expenses (lunch at work, coffee, newspapers and so on)”. And after getting a salary, distinguish all the money in envelopes with the corresponding notes and try to stay within the indicated amounts. If during the trial month, it turns out that one of the envelopes was quickly emaciated, it means that you should allocate a large amount for these expenses next month, or, if possible, try to spend money more economically. Do not forget about income control. In fact, there are not so many who “live on one salary.” In addition to salary, many have a part-time salary, payment for a rented apartment, and interest on a deposit. This “top” money most often disappears in an unknown direction. It is very important not to forget to include them in your budget.
Fact#2: Have a safety net
Few people have savings. Most of them continue to live from paycheck to paycheck. Few of them think about what he will do in case of loss of work, disease or, for example, a child born. In order for life’s difficulties not to be aggravated by financial difficulties, it is necessary to form a reserve in the amount of 2-3, or rather 6 amounts of mandatory monthly expenses, in order to be able to quietly look for a new job for several months. The easiest way to save is 10% of each earnings. This share is considered the most comfortable for deductions for any income. But this is far from dogma, everyone can find their own way. Someone puts aside for these purposes all unplanned income (for example, bonuses), someone deducts a fixed amount from each income. The most important thing is to save money in the reserve as soon as it falls into your hands. Otherwise, it may happen that there will be nothing to save up.
Fact#3: Set and achieve long-term financial goals
The first step should be to define real priorities – buying a car, apartment, home, child education abroad, comfortable rest. The second step is to set the time line. It is very important not to overestimate your own capabilities. If the income is clearly not enough to save up for the purchase of a yacht in 2015, you should either lengthen the term of the dream or replace it with a less ambitious one (for example, buy a motor boat) or start earning more. Only after that set yourself such a goal. The third step is to determine the “dream budget” and calculate how much you need to save each month in order to achieve it on time. After that, the main thing is not to go soft and regularly deduct the necessary amount.
Fact#4: Change the attitude to personal budgeting
Most people do not even want to try to regulate their finances due to the reluctance to keep a “financial diet”. They mistakenly believe that since they have written a financial plan for themselves, there will be no place in their life for either entertainment, spontaneous shopping, or trips abroad. This is actually 100% true. After all, no one bothers us to include in our budget an item of expenditure “on entertainment”. Just after the “adoption of the family budget” for these purposes, perhaps, less money will be spent, these entertainments will be appreciated higher. As for spontaneous shopping, this is certainly a monster mercilessly absorbing our budget. But, if for some people, it is a necessity, without which the world will lose its colors, well, you can write this expense item in your budget. But, again, it will be limited in amount.
Fact#5: Start investing
Investments are an “advanced” level. We do not recommend starting investing until a person has a formed reserve or his basic needs have been funded. It is not worth putting investing off. After all, the sooner you start investing, the more money you will earn. There is a family accounting. Now there are many patterns for keeping a family budget. They are easy to use and really help manage your personal money. But when choosing such a pattern, you should adhere to several rules. A foreign manufacture pattern should prefer a domestic product, since they take into account the peculiarities of “national economy”. The program should be able to work with different currencies. it’s important that you have the ability to add revenue and expense categories yourself. And also keep a family-wide budget, and share the expenses and incomes of each family member. The availability of detailed context-sensitive help, options for printing and importing data makes life very easy.
The secret to financial success is not in the amount of money earned, but in their competent management. The main thing in this business is self-control. But in order not to break at the most crucial moment, it is very important to add expenses for pleasant things in the budget.
Tags: finance, loans