Make an Analysis of Expenses and Income in Your Financial Planning
Ideal financial planning starts with analyzing monthly expenses and income. To plan, it is essential to know exactly how much you earn per month, how much you spend, and where you spend it. Analyze all your sources of income, fixed or variable. Then, list all your monthly expenses and in what categories (Housing, education, leisure, etc.) to see if you earn more than you spend and identify potential savings.
After analyzing your expenses and income, use the 15-35-50 rule to organize your expenses. According to this model, 50% of your income should be allocated to essential expenses necessary to maintain yourself daily, such as food, health, transport, etc.
Another 15% of income goes to financial priorities: paying off debts or saving for the future. The remaining 35% must be used for all other expenses related to fun and leisure, such as gym, restaurants, shopping, etc.
Spend According to Your Current Standard of Living
Today’s society encourages unbridled consumption, which often causes people to spend far beyond their means. The ideal financial plan provides expenses aligning with your current living standard. Spend more than you earn? To balance your finances, try to reduce your lifestyle-related costs, such as shopping, a salon, and a bar.
Specify Your Goals
Plan to start by specifying your goals. How much would you like—and could you—spend on each area of your life? Then, think about how you will achieve each action. For example, you may need to reduce energy or gas consumption to have an expense X on residential bills.
Even those on a tight budget do not have to discard leisure. It can reduce the amount allocated to this area and replace expensive outings with free or low-cost activities.
Use a Financial Spreadsheet
The financial spreadsheet will be your best friend when doing financial planning. With the help of the tool, you can track all your expenses, analyze whether you are within the stipulated goal, and, if so, step on the brakes so you do not blow the budget.
Compare Product Prices
A simple habit that helps financial planning is to compare prices before buying a product or using a service. With the help of the Internet, search various establishments for the values available for a particular item or activity, see if it fits your budget, and look for the best possible price.
Change Your Habits
Financial planning is a matter of habit. If you do not have a good relationship with your finances, changing is essential. See what negative behaviors do not allow you to have a healthy relationship with money, like buying too much when you are depressed, overspending on leisure, etc., and work to change these attitudes.
Buy Only What You Need
One of the great enemies of healthy finances is impulse buying. Avoid it by including all the purchases you need to make that month in your financial planning and stick to them. Be conscious and put on your list only what you really need.
Pay in Cash Whenever Possible
When the possibility of a discount is offered, paying in cash is an advantage. You buy the product at a lower price and do not fall into the trap of dividing an item several times and, in the future, being unable to pay.
Set Financial Goals
In addition to creating monthly spending goals, setting larger, medium to long-term financial goals is essential. Do you want to study for an MBA in two years? Search the course prices and save money to make this dream come true.
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