A problem that many people face on a recurring basis is that at the end of the month we have to stretch every penny in order to cover our expenses. Unfortunately, not all people have basic knowledge of financial culture to be able to take better advantage of their income; We do not know how to optimize our expenses, how to take advantage of economic opportunities or how to adjust our income so that we can pay for the economic commitments of the household. The good news is that there is a simple way to develop consumer habits that allow us to be calm. What we must do is start with the realization of a budget for our family, this will help us to see how many are our resources, how much we have to spend and how we can save a part.
There are several factors that we must take into account to make a budget that helps us make our expenses in a rational way. A family budget is, in general terms, an income and expenditure plan that allows us to know several things: how much money we generate, how much we spend, how much we can save and how much we need to be able to achieve any goal we set for ourselves. There are a series of steps that we can follow in order to prepare a family budget in a simple way. To make our budget we need to have at hand a little information, a few sheets of paper, pencil, rubber and if anything, a calculator. It does not take more.
The first step in developing our budget is the calculation of the income generated by all members of the family. We can take a sheet and divide it in two, on the left side we will record the income and on the right side the expenses. In the end, we can see the balance between income and expenses to know how we can optimize the management of our resources. It is very important to be exhaustive in the consideration of expenses in order to detect the leakage of money that we can remedy. Suppose that in our home is composed of four people: father, mother and two children under age. To offer a better education to their children, both parents work and each of them earns 6,000 pesos per month. One of the children is 16 years old and he likes being able to support his parents with the expenses, that’s why he has a part-time job that gives him 2,000 pesos. In total, family income amounts to 14,000 pesos. We record these data on the left side of our sheet.
Next, the second step to follow is the evaluation of the fixed expenses that all the members of the family make. The easiest way to do this is if we start with those that represent a greater burden. To continue with our example, let’s imagine that they are fortunate enough to have a home of their own, so they do not have to worry about paying rent. The strongest expenditure they make is the tuition of the children, 2,000 pesos a month for each plus an average cost of materials and supplies of 800 pesos. To this the transport expenses are added, the family has a car and spend approximately 1,400 pesos in gasoline. However, not all members move in the car and spend 1,800 altogether for the use of public transport. The expenses for food add up to 2,400 pesos. In addition, the costs of household services, electricity, water, internet, television, etc., add up to a total of 1,000 pesos. We have 11,400 pesos and we have only considered the fixed expenses, that is, those that are made every month.
To the previous sum we must add other expenses that we have not considered, expenses that are not fixed but recurring, examples of this type of expenses are meetings with friends, casual outings, parties, visits to the doctor, new clothes, etc. To continue with our exercise, suppose that these expenses represent approximately 2,000 pesos each month. Of the 14,000 pesos that the family generates in total, we now have 600 pesos left. According to our example, we can set aside 600 pesos each month to generate savings for emergencies. The best way to know how much money we need to cover these expenses is by examining the expenses we have made in the previous months and, if possible, throughout the year. So we can identify what is this amount in a more accurate so that our calculation is more accurate.
The third step to develop our budget is the consideration of sporadic expenses that we know we have to make one, two or three times a year, that is, expenses that we do not cover every month, but that we can know when we should pay them. For example, our family must pay 4,000 of the annual enrollments to the school of the two children. On the other hand, the service of the car per year costs 500. Imagine that the month arrives in which the inscriptions have to be paid, once covered the fixed expenses of the family would not be enough to pay the tuition. In this hypothetical situation, our family is in trouble. Here lies the need to have a family budget. Now suppose that our family plans their expenses appropriately. If we add the 600 pesos that save each month we get the amount of 7,000 pesos a year. With this amount the family can cover the inscriptions, the service of the car and still save 2,500 pesos.
The fourth step in the preparation of our budget corresponds to a stage of evaluation and improvement of our financial culture. By reviewing our income and expenses on a monthly and annual basis, it will be easier to identify capital leaks that prevent us from getting the money. In this way, we can know how to cut unnecessary expenses to save a little more money each month, which will allow us to have cash available to deal with any emergency. Also, once we have achieved the peace of mind that comes from not living burdened by short-term expenses, an exercise in the preparation and evaluation of a budget gives us the possibility to set medium and long-term goals. If we want to change our car, fix our house or change to another, travel for the next vacation or anything else, we can calculate the amount of money we need for it and consider a level of savings that allows us to get it in a certain time.
It is important to mention that once we have achieved a balanced budget it is not prudent to fall into despair when an emergency occurs. Unfortunately, the tragedy does not warn us in advance when it will arrive, so it is common for us to find ourselves without the necessary means to face it. One way to solve a problem of this type is through a Coldwellbankerprofessionals loan that we can pay with a fraction of the money we have available each month. In this way, we do not ignore the expenses that we must cover and we are able to solve any problem without having to go through the anguish caused by the lack of money. On the other hand, it is good to know that when an opportunity arises to acquire some good that implies a strong expenditure we can also take advantage of the advantages offered by different financial entities so that we can buy the devices that we need at home without this effort limiting our monthly resources.
In conclusion, the preparation of a budget for the family can be the best way to optimize our resources to avoid anguish and achieve our goals and objectives. The balance between our income and our expenses and the contemplation of the heavy disbursements that we must make throughout the year will allow us to make the best decisions for our home, avoiding headaches and guaranteeing us an effective use of our money. No need to be an expert in finance or a mathematical genius to perform this useful and fundamental exercise for the administration of our house. All you have to do is try it, put it into practice and discover its benefits.