Wednesday, November 25

How to develop a family budget

We begin today’s article with the intention of helping families have greater control of their expenses and improve the optimization of their income.

The first step is to get a bank statement from the last three months (including credit card breakdown) and, from there, I will provide some simple guidelines to be able to prepare an income and expenses budget that helps you balance the balance.

Second, they can choose between a blank page or open a spreadsheet (they can also use any mobile application designed for this). Make a line in the middle and on each side write: need or whim. Get hold of the bank statement and incorporate the charges from the bank statement as you consider they should appear on one side or the other. To give them an order, rank it from highest to lowest importance, that is: from major expenses to non-essentials. For example, the most needed expense would be food, later the payment of the mortgage or rent and so on: electricity, water, gas, school for children (along with extracurricular activities), various loan payments (such as the car , motorcycle, furniture, new smartphone … Any deferred payment), pet food, internet, telephone, television (including payment platforms), clothing, restaurants, gym, travel, magazine subscriptions, gasoline, insurance (health, home, vehicles – if in the latter they have an annual fee payment, they must be prorated in 12 months and add a monthly equivalent-), transport, leisure, etc.

The first problem you are going to have is recognizing what expenses are necessary and what are wishes / whims. It is necessary to reflect on this point. For example, if I raise the question whether the mobile phone or smartphone is a basic necessity, I am convinced that most readers will say that, in today’s lifestyle, it is absolutely paramount. I agree with that answer, but not so categorically. Today we use the mobile for everything, we have an infinite number of uses in the palm of our hand (talking with our loved ones, friends … We consult social networks, news, make purchases, listen to music, play games, answer emails, we use it to work , leisure …) but, from the point of view of spending, which of these uses are necessary and which are whims? That is, if I pay platform fees to listen to music, download games, movies, sports, are these expenses essential? The same happens with the payment of the telephony fee: unlimited calls and internet / data rates, but do I really need it? Is it possible that I can lower the fee by adjusting the rate to my actual consumption instead of accepting what they offer me? There are many telephone companies with a multitude of rates. Another problem that arises with the mobile is that, when using it for everything, our consumption parameters are recorded. This is where Artificial Intelligence comes into play, something that a few years ago we saw in science fiction movies and that is now used to record your searches and be able to offer you products tailored to your needs. Does it happen to you that when you open a search engine, offers of clothing, sports, fast food, games, investments, any product related to searches made at another time appear? Many of these products start out as whims, turn into desires and later into necessities. Advertising has played with us and it is something that it will not stop doing. We must be able to control it. One option is to have a bank card with the limit that we mark for leisure and whims. When you are bombarded with unique offers, you can also leave the product in the shopping cart for a week to reflect on its need. Better decisions are made cold.

Within the budget you can allocate a percentage according to the importance of each game. For example, if the house receives a monthly income of 2,000 euros, it would allocate 40% for the house (mortgage / rent expense, community of owners, capital gains / garbage tax, electricity, water and gas), 20% another part for food, 20 % transport (loan fees, gasoline, public transport …), 20% leisure / savings … At this point I want to highlight the importance of saving. Any budget must incorporate this item, since we must be able to face unforeseen expenses such as a heater break, car battery, community spill … As well as planning our future. If I don’t save anything during my active years (at work), will I be able to maintain my lifestyle when I retire? Topics that we will address in the following article to influence the problems that may arise and solutions for a smooth future.

Once you’ve completed your budget, you can subtract expenses from income. The result will tell you what our saving capacity is. In turn, we will see how much we can get into debt to request bank financing. That is, how much would you be able to not spend to pay a loan installment (for example, to reform your home or buy a car).

If at this point, your balance is not positive (income minus expenses) or the money that remains is very low compared to the total income: you must rethink what payments you can reduce to adjust to income. You can negotiate a reduction in the price of your insurance, electricity rate, telephony, eliminate some whims. In short, reduce expenses. This will improve our balance sheet, but the reality lies in knowing my economic position to lead a lifestyle accordingly. We will always have friends, family, co-workers who earn more or less money but each one has to know where they are and how far they can go without compromising their present and future economic situation.

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