How to Organize Your Personal Household Finances

First, it is crucial to remember that the budget is needed not to save, but to control everything. This means not only a reduction in spending but also an increase in finances is expected due to proper planning. 

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Budgeting allows you to more efficiently and, most importantly, consciously allocate funds. No one is surprised that the company has an accountant who controls debits and credits and decides where the money should be spent. The family budget, similarly, is the financial plan of the family, regardless of where you live, in Nigeria, South Africa, or elsewhere.

The Pros of Household Budget Planning

• Control: You always clearly know what you are spending money on. There are no questions, but where half of the salary is spent, and who has spent it. The same is applied to income, especially if you have several sources, and they change. 
• Conscious choice: After a couple of months of budgeting, you will really know how much each expense group accounts for, and you may want to adjust it — reduce or increase it. As a result, you will eliminate unnecessary expenses and also find out where you can increase spending.
• Convenience during crises: You can calculate for how long you can use your financial fund when the deadline is to go to work or earn income.
• No debt: Getting into debts/loans is minimized because you can calculate everything in advance and avoid this. Budgeting disciplines!
• Easier to plan big expenses: If you want to buy a car or go to the Maldives, then with a budget, it is much easier. You can find out in which month you will have enough money, or how you need to change the number of expenses/income for this amount to appear.
• Financial vector: The budget is very good at showing where your approach to finance is leading you to prosperity or bankruptcy. Perhaps it’s time to change jobs to increase income, form a reserve fund, and invest a percentage of income.

Possible cons are the following:

• Planning a family budget takes time, but with the right approach, almost everything can be automated. Although sometimes, it can even be nice to sit down for half an hour and figure out your financial goals for the coming year.
• There is a chance to go too deep into the calculations, counting everything to the point of exhaustion and analysing which of the supermarkets is cheaper to buy food. It must be remembered that a budget is a tool, not the final goal.

The Importance of Smart Investments

To create the financial reserve that will save you in emergency cases, it is crucial to learn how to make a passive profit. For this, Forex trading can be learned, for instance. You can use the services of Forextime to choose trading products and make a profit that will be directed to the reserve fund.

How to Manage a Family Budget

But the main purpose of managing a budget is the absence of unnecessary spending, the correspondence of expenses to incomes (needs and opportunities), and not saving for the sake of saving.

Income and expenses

The budget consists of income and items of expenditure. Income is all your sources of income: salary, interest from the deposit, part-time jobs. Everything is simple here.

Expense items are all your expenses by category: food, flat rental, utilities, cars, transport, shopping, travel. Often expenses are divided into 2 categories (required and optional) and subcategories are already made inside them.

The number of items of expenditure can be any. If you don’t know where to start, begin with any categories, usually, everything becomes clear after a couple of months of budgeting.

At a minimum, you need to specify the expense items that you need to track. For example, someone will need to separate “Alcohol” from “Food”, someone will need to divide “Shopping” into “Clothes” and “Jewellery”. To understand how much is spent, and then to control and not spend more than planned, if there is such a tendency.

Budget planning

The budget is based on the fact that you plan spendings for a month and then stick to this plan. At the end of the month, you will know if you deviated from the plan and by how much.

The point of this is not to spend more than you have. Not to get into debt, not to take loans, and not to live with an empty wallet for a couple of weeks before payday. The task of the budget is to make your spending conscious and avoid spontaneous purchases, which then usually lie idle in the closet.

You need to organize your budget so that you have a positive balance (reserve) every month, that is, a positive difference between income and expenses. If your income and expenses are irregular, then don’t look at every month’s trend, but quarterly or yearly. You should not live in debt and increase the number of loans, this will not lead to anything good.

Yes, you can keep a budget without planning at all, just mark income/expenses and that’s it. By the way, in some applications, there is just no planning. However, this is more suitable for organized people who are not prone to unnecessary spending.