Make a budget to improve finances
Doing the accounts helps to take control over your personal finances, that’s why in this opportunity we want to give you some tips to make them work for you.
How often do you balance your personal finances? We begin with this question because we know that many people do not make the judicious task of finding out at least every semester, what they have, what they should have, what they need and what they have achieved.
And it is not that they do not want to do it, it is rather that they have never had the habit or rather they tend to believe that if they do it they become grids with the money and with it even stingy.
However, this is nothing more than a myth, because if you are organized and concretely plan the management of your finances you will only achieve good results, for example, meet your goals, save a good amount of money a year or invest in something that generates good returns.
What’s more, if you’re clear about money, you’ll never be over-indebted, losing wealth or needing silver, quite the opposite, you’ll get your wealth to take a giant step and be successful.
At first it may be difficult, but if you have discipline you will succeed. The budget is nothing more than a way of classifying your money into income and expenses and then making decisions about managing that money, what you can do, what you should stop doing, and what’s best for you.
To begin with, you only need a piece of paper and a pencil or a cell phone if you tend to be more digital with your tasks, then it is only a matter of following the steps that we are going to give you here and that Money Crashers and the corporate manager of Juriscoop Group, Fabio Chavarro, propose:
- Make the decision: just as a person who wants to start exercising or losing weight must be willing to make a monthly record of what we are going to mention. If you’re reading this article, it’s because you’re sure or at least want to start with a budget that fits your financial life.
Know how much you have: make a careful list of all your financial products, then write down how much money you manage in each account and how much income you receive month by month, also take into account the interest rates charged for example by credit cards and finally write down what are the expenses of each product and of course those of the month that you may move them in cash.
- Knowing how much money you are making: if you only receive your monthly salary is going to be very easy, but if you are independent or earn by the hour things change, because you do not always receive the same money. If this is the case, we recommend that you average the recurring income for the last six or twelve months and if you want to be more conservative, choose the lowest amount, this will allow you to occur in the event of an emergency or an additional expense.
- Know what you owe: do you always have to borrow or scratch your card at the end of the month because you can’t afford it? Then write down in order who your lenders are and of course how much you owe them. Now, if you’re paying off some credit, include it, and if you’re delinquent, it will also help you know how much you owe, and then make a plan to dissolve all your debts.
- Know where and what your income is going: you already know how much you owe, now you have to calculate from your income how much you are spending month to month, that is, the expenses you often have. To do this you can save all your invoices and then elaborate some categories according to the type of expense, these can be very general or very specific, choose the one that best suits you. The categories could be: food, rent, public services, daily expenses, vehicle, children among others.
- Determine your net value: it is very simple, it is a matter of taking up the previous steps and making an operation: subtract. Yes, determine your net worth by taking your total income and subtracting it from your total expenses. The result can be encouraging or pessimistic, if it is the first, you can take the result and convert it into a permanent savings or divide it in two, one part for entertainment and the other to save, everything depends on the amount, but if the situation is the second case, cheer up! you must devise a strategy to get out of debt.
- Knowing where your money isn’t going: now that you know how much your net worth is worth and your result was positive, we recommend that you draw up a list of possibilities where you could leave or keep your money in the short or long term, it could be an investment fund, a savings account, opening a CDT, owning a business, buying a house or studying a career, it all depends on your desires.
- Follow-up and monitoring: the results will only be seen in the long term if you are disciplined, because keeping track and a record of your finances does not take more than a couple of hours or minutes. Let’s get to work, this task must be done month by month, remember that it is not only a matter of writing down your expenses and income, but rather of making wise decisions that lead to an effective management of money.
- Financial peace of mind: living without stress is priceless, enough with the stress that some personal conflicts and daily work can cause to have financial stress. Having a budget frees you from an additional cause of stress.
Finally, Chavarro recommends that “the most important thing is to know perfectly how much is our family income and how much is the total expenses and thus know the remaining money.
We must avoid uncontrolled use of credit cards, but in the case of using them we must be very attentive to the interest generated, since we will have to add them to our expenses in the following months.