For most people with average wages, the question of improving the financial situation is one of the main ones. There are many ways to settle spendings or increase income. Everyone knows about the concept of investment and that it is a guarantee of long-term «earnings». For example, the team https://jkr.co/about helps each of its clients to manage their money correctly and supports them at every step. But this direction doesn’t attract most people, and they just want to stabilize what they already have.
Financial planning seems so exhausting that the first desire of the majority is to ask an expert to «just say what to do». But it doesn’t work that way. It is worth remembering that financial decisions are life decisions and the first question to which it is important to answer is «For what the regulation of finances is needed?» For many people, an answer is a significant event, a big purchase, or a trip. Therefore, it is important to determine the goal and go to it in small steps. Any goal requires a plan.
Many financial websites advise on budget allocation, but most of them are related to bank deposits and investments, but before starting to invest, several rules are needed so that further spending does not lead to total bankruptcy.
- Balance calculation
The first step is to calculate income, expenses and set financial goals. Permanent income is, for example, salaries and rental income. If there is additional income in the form of stable freelancing, it also needs to be contributed to the plan.
Variable incomes by type of part-time job, percents on a bank account, cashback on a card should be ignored.
- Fixed expenditure
After summing up all regular earnings, the next step is to subtract the expenses that are known in advance:
- mobile connection;
- service subscriptions;
- utility bills;
- rental of property.
After deducting the fixed costs, the amount that will be used for variable costs (clothing, food, travel, deposits) remains.
- Fixing goals
Every budget planning should have at least two additional categories, such as contingency fund and dream.
On the reserve fund, every month people need to set aside 10-25% from the number of variable expenses.
It is better to allocate 10% for a dream. An additional plus will be to set aside these reserves for a deposit with percents so that the amount would increase a little by itself.
As a result, the sum remains, which should be divided by 30-31 days. This money will be spent on groceries, clothes, and infrequent visits to cafes.
After seeing the numbers, sadness may flood, but people should ignore this moment. It will be difficult to live with limits at first, but discipline will develop over time.
- Unforeseen expenses
Sometimes urgent expenses occur, for example, a trip to the doctor. It’s important to follow the plan here. If every day there is the remainder of the planned amount for spending, it should be postponed. A few days later, the required sum will be accumulated, with which it will not be difficult to pay in a hospital or buy the necessary thing.
- Large purchases
Firstly, it’s better not to make purchases right away, time should be distinguished to think and make an informed decision.
Secondly, this approach will teach to plan purchases in advance. This is a useful skill.
Thirdly, buying something in this way will bring a lot more joy, because significant efforts have been made to acquire it.
If the required amount of money has not been collected by the end of the month, patience is important until the end of the next one.
It is important to fix every spending, then it will become a habit. By adhering to these rules, the result will be visible in a few months. Any excess balance can be used as investments in securities or stocks of large companies. And, of course, it’s possible to find additional income to facilitate the situation with savings.