Budget is the main part of financial planning. It is not only about the long term and goals, but also simple expenses for every day. Follow these seven simple rules to set your budget..
1. Find out your own financial goals
Before you make a budget, find out the goals and their cost. Take a few minutes and think about what you want to achieve: stop living from paycheck to paycheck, pay off your student loan, close your mortgage ahead of schedule, go on vacation, or save up your starting capital for your own business. The financial goal will allow you to find out how much you need to save at the end of each month. This is the first key to creating an expense and income plan..
2. Use funds controls
Pay attention to modern mobile applications. Natalia Bessonova, director of communications of the “Conscience” installment card, notes the advantages of working with them: “There are a large number of simple services (for example, CoinKeeper) that allow you to record when, how much and what money is spent. If necessary, configure access for the family in the application and view full statistics. If you don’t write down expenses immediately (and when paying in cash it often happens), then some amount will be “lost”, but you will get a basic understanding of the cost structure ”.
Oksana Tverdokhlebova, an expert at VIGTrans, adds: “Install yourself a financial application on your phone. I have a “Journal of expenses and income.” Mark your daily expenses there (travel, food, etc.). At the end of the month, a report is made on all cash transactions. By its results, track unnecessary expenses ”.
3. Track income
In addition to expenses, the budget must reflect incoming profits. This will allow you to understand how much you can manage. Often, it means only stable income: wages or rents for an apartment. However, in order to draw up the budget correctly, make a one-time profit in the income item: gifts from relatives, repayment of a debt, or a side job. Then the financial picture will be complete. Break the table by month and record changes in income associated with a pay increase or the acquisition of an additional source of income. Seeing how much you earn, you can correctly allocate money for expenses.
4. Track expenses
Determine how much money goes into regular and irregular spending. This is stated by Irina Zhigina, financial consultant: “Distribute money for regular items of expenditure: food, rent, clothing, study, transport, medicine, a gym. Budget out irregular expenses such as vehicle maintenance, insurance, taxes. ” Try to consider possible expenses in advance: gifts for parents for birthdays or a long taxi ride.
Since it is impossible to foresee everything, select a separate budget line item that will be used to form a “safety cushion”. She will save from a shortage of funds in a difficult situation. Record the amount you will send to a special inviolable account.
For simplicity, experts advise breaking the budget into a system of 50% -20% -30%. The first part is basic needs, the second is goals, personal savings, investments or paying off debts, the third is non-basic needs: travel, restaurants, entertainment.
Olga Polishchuk, expert of the Financial Health project, adds: “At the beginning of each month, transfer 10% of earnings to a separate savings account (this may be a contribution with the possibility of replenishment). You will see that living on 90% of income is no more difficult than living on 100%. When you develop discipline in yourself, you can save 15-20% ”.
5. Optimize costs
Using money will help save money. Natalia Bessonova, says: “For example, if you often fly by air, it’s convenient to use not just a bank card, but a card with miles bonuses. If a large amount of your money goes to gas, then it’s more profitable to pay with a cashback card at gas stations ”.
Tatyana Surzhikova, consultant on financial literacy of yourfinance.rf project, adds: “Analyze monthly expenses, draw conclusions where you need to save. Compare the cost of the goal and the amount of savings, so you determine how much time it will take to save “.
Alexey Novikov, Head of Marketing, Otkritie Management Company, says: “Write a list of planned expenses in priority order. Such a list will allow you to determine the approximate “cost” of costs and identify the trend in costs. If priority items are expensive, be prepared for the fact that with a tight budget, lower priority costs will either have to be reduced or completely abandoned. Following this logic, you should not classify the cost of food and payment of bills as the last “.
6. Plan large purchases
Spontaneity is the main enemy of a personal budget. It is under the influence of a momentary impulse that large sums are spent. A bottle of water bought on a hot day will not cause an imbalance between income and expenses. But the acquisition of expensive things that are not included in the budget will lead to financial instability..
Decide in advance what exactly you need to accumulate and evaluate the size of the amount for this.
“Calculate how much you need to save monthly for the implementation of plans and put these amounts in budget. For example, in a year you want to go on vacation with your whole family and you need 120 thousand rubles for this. This means that every month it is necessary to save 10 thousand rubles, ”says Irina Zhigina.
7. Stick to your plan
Natalia Bessonova, warns: “One of the most common practices is to reward yourself for your efforts and merits, buy a phone more expensive and more status, go to stores where the average check is higher, justifying this with the fact that“ now I can afford it, I made money or saved money “. Of course, striving for the best is good, but such a model of behavior will lead to the fact that income has not increased, despite wage growth and savings ”.
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Can you provide any tips or strategies on making an effective budget for accounting purposes? I’m specifically looking for guidance on how to allocate funds, track expenses, and set financial goals. Any recommendations or best practices are greatly appreciated!
Is there a specific method or approach to follow when creating a budget in accounting? What key factors should be considered and how can one ensure accuracy and effectiveness in the budgeting process? Are there any recommended tools or software that can simplify the budgeting process for businesses or individuals? Additionally, are there any common challenges or pitfalls to avoid when creating a budget?
Could you please provide some tips or guidance on how to effectively create a budget for accounting purposes? What are the key steps or factors to consider in order to ensure accuracy and efficiency in budgeting? Any suggestions or best practices would be greatly appreciated.