Being able to manage your finances is a skill that everyone needs. The rhythm of modern life suggests that we must control our finances: income, expenses, provide the emergence of unforeseen expenses, etc.
A person will not survive without financial resources so they need to be able not only to earn but also to spend. How to do this rationally so that there is enough money to get everything and there is a surplus left to achieve larger goals?
Why Do We Need Home Budget?
Determine the amount of money that you can not spend on your current life but direct to achieve your goals and financial independence. Provide living comfort so that money does not “slip through your fingers” but is spent on something necessary. Everyone knows that it needs a home budget to be planned, but few do it.
Rational Use of Home Budget
The family budget is compiled in the form of a balance of family income and expenses. In economics, a balance is a system of indicators that characterize a phenomenon by weighing or comparing its individual sides.
The balance of income and expenses of the family compiled for the reporting period (usually a month, quarter, year) is called the reporting balance. Compiled for the coming periods is the planned balance. As a result of drawing up a reporting or planned balance of income and expenses of the home budget, a deficit or accumulation is revealed, that is, an excess of the home budget.
Home Budget Calculation
In order to use their income effectively, a family must properly budget, think carefully about purchases and make savings to achieve their goals. To draw up a family budget, it is necessary to draw up a list of all sources of income among family members. These are salaries, social benefits, and interest on savings. Do not forget that you also can take a small loan at https://directloantransfer.com/300-dollar-loan/ to even out your budget.
In the expense item, you need to list everything that you have to pay for within a month: rent and services, food, travel, taxes, and fees. The planned expenses also include savings for the future. If income is equal to expenses, then this is a balanced home budget. If the estimated expenditures exceed revenues, then this budget is in deficit. A budget in which revenues exceed expenditures will have a surplus. If income exceeds expenditure, you need to exclude unnecessary purchases from the plans to balance your home budget.
Rational Use of Resources
- Increasing income strategy: family is trying to increase the revenue side of the budget by any means in order to bring it into balance with the expenditure side;
- The strategy of cost reduction: family reduces budget expenditures which leads to their compliance with the family’s income;
- The strategy of self-sufficiency and self-service is the transition of the family to the norms of subsistence farming, the development of personal subsidiary farming. At the same time, the family seems to be self-sufficient in agricultural products, and the share of expenses on food is reduced;
- It is advisable to avoid debts, loans, credits, or quick repayment, take the amount that you can return on time;
- Permanent “stash”, ie. free money for sudden, unforeseen circumstances;
- List and plan of purchases.
Proper Ways to Plan Your Home Budget
There are two obvious reasons. The first is the wrong attitude towards your home budget. The second is that the process of planning a home budget becomes rather complicated.
Proper Attitude Towards Home Budget
Many people associate competent management of personal finances with the need to save a lot, to deprive themselves of the pleasures of life. This is a big mistake. In fact, the quality of life should improve. How does this happen?
The fact is that most people spend at least 20% of their money thoughtlessly. For example, the abuse of energy drinks, frequent meals in cafes, overpayments for goods and services that could be cheaper (clothes, mobile communications, etc.), impulsive purchases. Refusing them will not in any way reduce the comfort of life.
But with what pleasure you can redirect part of the saved money to something really important: personal care, leisure, hobbies, gifts to family and friends.