Financial management is a question that sooner or later comes up in any family, even if it only consists of a single person and cats (and especially if the cats are extremely hungry). That is why it is necessary to understand the basics of money management in order to successfully preserve and grow your capital. You don't have to be a professional accountant to learn how to manage your income and control expenses, but you still have to know a few basic things.
So, where to begin?
1. Identify all of your sources of income and make a list of your assets
To begin with, you need to identify and systematize absolutely all of your sources of income. This will help you obtain a complete picture of your financial situation. Start with determining your official salary, but do not lose sight of other cash inflows. For example, your spouse in her spare time makes ornaments from beads, which she then sells through her Instagram account. And even if it does not bring in a huge amount of money in comparison with your basic earnings, it can still generate a fairly pleasant amount in the course of a month. This factor should also be taken into account in your family budget.
Make a list of all the assets that you own. Assets are the tangible and intangible resources that can help you make a profit in either the near future or over the long term. Assets include cash and electronic funds in various currencies, securities, real estate, vehicles, and so on. Having a completely structured list of assets will give you a full understanding of your financial situation, and it will help you clarify which of these assets should be redistributed if necessary.
2. Make a budget
Budgeting is perhaps the most difficult and important part of personal financial planning. Ideally, you should have a multi-level budget: it should have an overall goal for the whole year (save a certain amount) as well as intermediate milestones that will allow you to determine the success of your plan.
3. Save money every month
Calculate how much you need to save each month to reach your final goal, and try to stick to it. If you know in advance that you are going to spend a lot of money during certain particular months (such as during the vacation season) and there are not going to be any extra funds then, it's better to set aside a little bit more during the months before and after in order to level out the difference.
4. Make a monthly plan
Remember those voracious cats? The cost to buy them food every month should be included in your monthly expenditure plan. Make sure to include all of your upcoming expenses, and do not forget to differentiate between necessities (winter boots to replace the torn ones) and desired discretionary purchases (another beautiful pair of shoes in a slightly different shade of black). First of all, funds must be spent on important things and only then on what you really want.
When planning, do not forget to take into account the amount that you need to put away to achieve your annual savings goal.
5. Stick to your payment schedule
Pay separate attention to your regular payment schedule. If you have a loan or a debt that you have to pay, mark the days in your budget when your payments are due. First of all, this will help you to correctly plan all of your expenses, and, secondly, you will save money on late charges and extra interest.
6. Keep your records in order
Do not forget to keep all of your financial records as well as the history of such records if you store them electronically. Keep them in order and follow an organizational scheme. Sort documents by date from the earliest to the latest. This will make it much easier to find a particular document later on if you need to.