The question of where to get the money is relevant for most residents of our country. The reason for this is simple - they are always in short supply, but I want to afford more. It seems that a large number of banknotes in your pocket will save any situation, but in fact, without planning personal finances, they can go to all sorts of rubbish like buying a new video box or a set of toys.
When does the need for planning arise?
Governments of different countries annually report on the growth of the economy and the welfare of citizens, but this is far from always the case. Real incomes of residents of a country often differ significantly from those that are identified by various measurements. Your salary may correspond to the figures given, or it may be significantly lower than average indicators, regulators may not even know about this. If you are not too lucky with your salary, you have to plan personal finances, this is necessary for a more competent distribution of cash flows that come into your family.
A constant lack of money is far from the only reason requiring the preparation of a financial plan and its further implementation. For example, if you plan to go somewhere to relax, and you can’t afford to immediately get a ticket, the most convenient way to get the right amount is to postpone part of your salary on a monthly basis. A similar rule applies to the acquisition of new things, training, repair of broken household utensils, etc. If you set the budget correctly, in the very near future you will notice that you have enough money for absolutely all your desires and needs.
Another reason forcing close attention to the financial planning of the personal budget is social insecurity. At any moment, an event may occur that will negatively affect your income - a reduction in work, a long illness, economic crises, etc. If you do not know how to properly distribute your own finances, you may encounter a lot of problems, so it’s better to learn to do this in advance.
Where to begin?
The essence of personal financial planning is to accurately account for your own income and expenses, which should be as honest as possible. In a quality plan, absolutely all your expenses should be taken into account, including the purchase of ice cream or a package of milk. At first it can be quite difficult to overcome yourself and record absolutely all financial transactions committed in the reporting period, but the result is worth it.
Get yourself a separate notebook in which you will write down all your financial income and expenses. You should not rely only on your own memory, you are unlikely to be able to remember small expenses, in addition, you will most likely have to operate on the cash flows of your household as well, which will add additional mental load.
Accounting must be kept for a month, after which you can conduct an initial analysis of the data. If you perform all operations using a bank card, then the entire history can be viewed in the personal account of a financial organization, but all purchases for cash will have to be recorded. It is more convenient for someone to save checks, for someone it is easier to record purchases in a notebook or application - everyone chooses the most convenient option for himself.
Why are unmanaged expenses dangerous for the budget?
People far from large cash flows have much easier financial planning; their financial planning system mainly consists of costs that cannot be influenced. These include payment of utility bills, transportation costs, loan payments, etc. It is quite difficult to reduce them, and often this can only be done by depriving yourself of certain amenities.
It’s also customary to lay gifts for the holidays and birthdays, a fairly large amount of money goes here throughout the year. Experienced financial managers recommend that you plan in advance the amount of presents and their amount, due to this you can avoid the situation when a person at the very last moment is looking for money for a gift and takes them from those that were put aside for more important things. Do not forget to plan expenses for your own birthday, if, of course, you are going to celebrate it.
There is an opinion that one should put up with these expenses and not try to reduce them in any way, but not everyone agrees with him. If suddenly a person is left without work, it will be difficult for him to cope with a large number of costs. That is why it is worth trying to reduce unmanageable costs, it will be much easier to do this if you have a loan. For example, your monthly loan payment is 6500 rubles, but you can afford to pay 2-3 thousand more monthly. The very next month after the increased payment, you will notice that the amount of the contribution has become a little less. A gradual reduction in the payment will allow you to save a rather large amount and not overpay the excess interest to the bank.
What can you refuse?
Managed expenses are the most interesting part of financial planning. In the financial planning system, they should play a major role. It’s much more productive to break them down into different categories - “entertainment”, “sports”, “food”, etc., this will help you decide where exactly the majority of your money goes. The numbers that you get when analyzing the previous period should be considered as input data for planning.
When preparing a plan for the future period, it is necessary to determine the maximum comfortable amount for each category. Be prepared for the fact that it will not coincide with that obtained in the general accounting of expenses for the new month. It’s best to budget only what you really need and add some more money for this to allow for any maneuvers.
Home financial planning should be built taking into account monetary and time opportunities. For example, if you often had dinner in a cafe and decided to refuse it, the gain in money will be significant. But the time spent on the purchase of products and their preparation can increase several times. If you can cook only once a week, then it’s best to cook for 2-3 business days, and the rest of the evening you can afford to dine out.
Those who are just starting to plan their budget often make a gross mistake - they completely refuse to entertain themselves. It is impossible to do without them at all, sooner or later you will start to get nervous and break loose after spending a lot of money. Plan a certain amount for going to the cinema and other entertainment venues and try not to exceed its limit. In parallel with this, it would be nice to think about whether it is possible to replace evening trekking in the cinema with a morning one, and trekking in an expensive fitness club by buying a subscription to a regular “rocking chair”, and thereby save a lot.
How to create a budget for the future?
After you have analyzed your expenses and described them, you can do financial planning, it will be much easier to distribute personal finances. Creating a family budget is much more difficult, since this activity requires taking into account the needs of all family members. To create a personal plan, you need to know three things - the current balance, your plans for the future and the budget that you need. The most important thing is to answer the question of how much money will make you happy.
Financiers believe that each plan related to finance should have a specific goal, only then it will be fully implemented. For example, if you want to buy a new car, you can think not only about how much you will need to save from your salary, but also about how to earn extra money.
Such a plan provides for the creation of a register of all expenses that will fall on your shoulders in the current reporting period. As soon as you prepare a general list of costs, the amount that you need to implement all plans will become clear. Then you need to make a list of sources from which you expect cash receipts during the month and indicate the total income. All unofficial earnings should be taken into account in financial planning, personal finances can be spent as efficiently as possible only if you are honest with yourself.
Having received the total results of income and expenses, you will be able to understand which particular item of expenses takes you the most money and reduce it as much as possible. In addition, you will immediately see exactly what amount you are missing in order to feel comfortable and to think about the realization of your dreams.
Is it possible to achieve security with a budget?
If you have not previously drawn up a financial planning plan, you can take existing options and stick to them. There are three main types of such plans, on the basis of which you can make your own. The first of them is a kind of program that protects you from natural disasters, impoverished old age, as well as other troubles.
In addition to the standard distribution of income, the main measures that can be taken here include insurance of all available property and life, as well as the formation of a financial pillow, the main task of which is to provide you with finances for at least six months. It is also customary to include the pension program in the form of a long-term deposit, which will help you feel comfortable in a situation where you cannot work.
Thus, the planning of own finances in this case should be carried out so that part of the proceeds goes to the above programs. However, there is an additional caveat - in the presence of credit loans it is very difficult to form a financial airbag. In this case, insurance and a pension deposit can be observed, but it is also fraught with difficulties, which is why it is recommended to pay off all your debts first.
What to do when debt is over?
The next financial planning system is called "Comfort", it is familiar to absolutely everyone, and most often implies the availability of their own housing, transport, cottages, as well as the ability to arrange vacations for the whole family at least once a year. Even if you make good enough money, it is better to save the necessary amount in advance. For example, if you plan to move to a more spacious apartment after five years, you need to save so much money that, together with the proceeds from the sale of old housing, would be enough to buy a new one.
If you plan to give your children the highest quality education, you will also have to take care of this in advance. Distribute your finances in such a way that some of them go to the further education of your children. You can open a special deposit account at interest, which will increase annually depending on the accumulated amount.
This financial planning system is suitable for those who have a steady income and plans only to increase it. The most important thing here is to determine the goal that you want to achieve, on its basis you can find out how much money you need to achieve it. The goal must be real, achievable and limited in time, then it will be easier for you to implement it.
How to get rich?
Proper financial planning of your personal budget should lead you to the idea of creating your own business, which in the future will help you get away from business and enjoy life without thinking about money. You can easily accumulate the amount you need to open a business, and then you do not have to apply for loans to financial institutions.
In this case, your assets will be events and funds that allow you to make a profit - stocks, securities, etc. This will also include your monthly salary if you continue to work in parallel in any organization, as well as money that you loaned to your friends. Using assets should help you get additional benefits, which can also be expressed intangibly, for example, money spent on vacation will bring you the opportunity to relax, and then with renewed vigor to return to work and make it more productive.
To date, there are three parts of personal financial planning: assets, liabilities, net capital. Liabilities should include all monetary liabilities and debts - loans, taxes, utilities, etc. Their main difference from assets is the intangible component, liabilities cannot be touched, they are abstract units.
Net capital in this case will be the difference obtained by deducting liabilities from assets. There are several options that can significantly increase this amount: your business, the formation of passive income from real estate, investing in securities, etc. The easiest option is to purchase your own home for subsequent rental, this does not require a lot of effort and knowledge .
The most profitable way to get rich, many still consider the organization of their own business, but few come to it. The deterrent factors here are the need to build the process from scratch, lack of experience and unwillingness to delve into accounting wisdom. However, the choice in this case is an individual thing, and everyone decides for himself.
How to set a goal and achieve it?
Personal financial planning provides that you have a specific and time-limited task that you want to solve. For example, you want to buy a car worth 300 thousand rubles. The monthly salary is 40 thousand rubles, of which about 15 are spent on loans, utilities and other obligations. The remaining 25 thousand rubles will need to be distributed among all categories of managed expenses compiled in advance.
Suppose that you spend about 5 thousand rubles a month on entertainment. You cannot completely abandon them, but you can modify the activities themselves so that they take a little less money than usual. If you have fun for 2 thousand rubles, the remaining three can be used in a more useful way - put aside on the car. But postponing for 100 months is not the best way, so you can think of an alternative option - you can increase the amount of payment on credit loans every month, which will reduce the repayment period and get rid of them faster. The released funds can be put aside for the purchase of a car, and the time for collecting money will be significantly reduced.
Is there a single budgeting algorithm?
Since each person is individual and has his own goals, it is impossible to form a general scheme for creating a money plan. It is much more efficient in this case to adhere to the main stages of financial planning - analysis of current expenses, drawing up a list of assets and liabilities for the future reporting period, setting goals, direct creation of the plan itself, its implementation and final analysis.
These steps can be mixed with each other and supplemented with those that can help you in solving problems. The greatest effect can be achieved by taking into operation absolutely all of them. If necessary, you can use the services of financial consultants to help you figure out a plan for the coming period.
What must a financial plan be considered?
The basics of personal financial planning should take into account the individual characteristics of the compiler. The document may reflect your personal parameters - gender, age, lifestyle, and even the city in which you reside. The plan should clearly reflect your financial goals, it is desirable that they give specific answers about what you want to receive, when and how much it costs. , SMART - , , , , .
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Planning personal finances and a family budget is at the same time much more difficult to draw up a financial plan for one person. The main reason for this is the need to take into account the goals and objectives of other family members. They can differ significantly from yours, so you have to learn to negotiate with each other and find a compromise. The most difficult thing is if the family has small children who constantly need clothes, toys and developmental courses. It is rather difficult to predict such costs, but it is necessary to contribute to the budget, therefore it is recommended to lay a rather large sum of money on this expense item.
Another challenge is maintaining a budget. Planning personal finances in this case can be useless activity if you do not accustom your household to the strict implementation of existing agreements. Acting according to the plan alone is much easier, but you cannot leave the family alone. For some households, the financial plan may seem complicated enough to fulfill, and you will have a new task here - you need to clearly describe all its advantages and explain to family members that it is necessary in order to improve their existence and allow them to fulfill their dreams.