Budgeting. Although calculating net worth gives you a general understanding of assets and liabilities, it is more important to know your monthly income and expenses. You will learn where to spend your money every month. Record all expenses and you will know exactly where you can save money. This is the core point of all financial planning
2Determine the source of income. Make a list of the various sources of income each month (such as salary, child support, etc.). Add up the various incomes to get the total monthly income.
3Determine the monthly expenditure. It is very helpful for you to record various expenses in categories. For example, you can record items such as rent or mortgage repayment, housing insurance or tenant insurance, and utility bills as “housing” expenses; and record car loan repayments, gasoline fees, car repair and maintenance fees, and auto insurance as “transportation” expenses. Category” expenses. Add all expenditures together to get the total monthly expenditure. Don’t miss out on entertainment, food, clothing, credit card repayment, tax payment, and other miscellaneous expenses.
4Explain the purpose of temporary expenditures and variable expenditures. Keep in mind that some expenditures are fixed (that is, the same or the same every month), while some expenditures are variable (changing often, or sometimes not). When formulating a budget, try to explain the purpose of variable expenditures, including expenditures that are not incurred every month.
- You can make a list of variable expenditures in recent months. Add these expenditures and divide the total by the number of months. In this way, you know what your average monthly variable expenditures are, and then take them into consideration when formulating your monthly budget.
5Subtract total expenses from total income. If your income is more than your expenses, you have surplus money that can be used for savings, investment, or spending according to your financial goals. If your expenditure is greater than your income, then you should look at what expenditures in your budget can be reduced or avoided.
- If you still don’t know how much income and expenses you have, take a few months to record your income and expenses in order to understand the situation.
- Always evaluate and update your budget. Be sure to include new expenditures in the budget in a timely manner and remove expenditures that no longer exist.
1Look for the money you can save. No matter what your financial goals are, saving money is a core part of financial management. Whether your goal is to buy a house, retire early, or pay school fees for your children, saving money is a key way to achieve your goals.
- Check your budget and look for savings opportunities. See what unnecessary expenses can be saved in the monthly expenditure. For example, if you go to a restaurant three times a month, or buy lunch every day at work, try to reduce the number of meals out to once a month, or bring your own lunch to work.
- Look at which expenditure items in the budget are “what you want” and which expenditure items are “you need”. Discover money-saving space in the “what you want” spending items. Similarly, take a good look at the expenditure items “you need” and ask yourself if they are really necessary. For example, a mobile phone may be essential, but you don’t need to buy a 3GB data package, because a 1GB data package is enough for you.
2Learn to develop the habit of saving money. First, open an account with deposit insurance in a reputable bank. Experts recommend a “pay yourself first” method of saving money. That is to say, whenever you pay a salary, you must first save a sum of money from your salary. You need to include your savings in your budget. Many banks provide automatic deposit services, which can automatically take a part of your salary and convert it into deposits according to the amount you set. You can apply for this service from the bank.
- Determine the monthly deposit amount you are willing to accept according to your needs and expenses. As time goes by, you will save more and more money. The point is to save money, even if it’s just a small sum.
- Saving 10% of your income every month is a good start. Saving money is better than not saving.
- Depositing money in accounts with interest income (such as checking accounts, current deposit accounts, fixed deposit accounts, etc.), even a small amount, can bring you benefits under the effect of compound interest. In other words, the interest generated by this period of principal will be added to the next period of principal, thereby generating more interest in the next period, and so on, the total value of the deposit in this account will increase.
- Practice makes perfect. By saving a sum of money each month, or “paying yourself first”, you will develop the habit of saving money and learn to live with money other than deposits, as if deposits did not exist from the beginning. You will feel that there is anything missing. You should think of deposits as an essential expense, just like renting a house or paying off a loan.
3Prepare emergency funds. The method recommended by experts is to use a sum of money as emergency funds to deal with emergencies such as unemployment or serious illness, and this money can meet your various needs within three months at least. Deposit the money in a bank account with deposit insurance, which not only guarantees the safety of deposits but also facilitates withdrawals when necessary.
- You can also purchase appropriate insurance to protect yourself from various financial problems. If you have any questions about homeowner’s insurance or tenant insurance, health insurance, life insurance, unemployment insurance, disability insurance, or auto insurance, you may wish to talk to an insurance agent.
Take advantage of the benefits of special savings policies. If the government or business implements savings incentives (such as savings incentives for education or retirement), then you may wish to consider making good use of them. If the government or employer can implement this type of savings plan, or provide other benefits (such as tax cuts), this will help you get closer to your financial goals.
- For example, in the United States, you can open a 401(k) retirement account through your employer. When you deposit money into your 401(k) retirement account, your employer will deposit corresponding funds into this account in a certain proportion, thereby increasing the total value of the account deposits. Similarly, any American can open an individual retirement account (IRA) and enjoy potential tax benefits