Christmas came: How do we get the money to reach us?
Sean Cole, a careful office worker, is filled with enthusiasm for the holiday season due to the greater movement he observes in his work for the celebrations and greetings of colleagues and customers. But also because it is a month that brings other satisfactions, such as “grati”. However, he knows there will be higher expenses for gifts and other attentions. The questions invade it sooner rather than later: Will it reach me for the extra expenses that I have to do? What happens if I want to save part of my gratification for other future expenses?
Help you decide better without being a financial expert
The doubts that Sean Cole faces are shared by many other workers. Fortunately, there are certain tools that can help you decide better without being a financial expert. The only ingredients that stakeholders should put in are time and commitment.
For this case, it is recommended that Sean Cole knows his family budget well. This will allow you to compare your income with your expenses, but above all, it will let you know where you can adjust them to achieve what you are looking for (objectives).
Count of all our income and expenses in a given period
This powerful tool requires an orderly count of all our income and expenses in a given period, usually one year. When doing so, the first aspect to take into account is to count the money that is going to enter each month, considering the regular ones and also the non-regular ones, as long as they are true. After that, the expenses we have to face are discounted, such as electricity, gas, water, telephone, schools; as well as debt payments. You will quickly realize that some income or expenses are not repeated every month (such as Christmas) and therefore should only be considered in the months that occur.
How often should I prepare the budget? The most advisable thing is to prepare an annual budget, since this allows the identification of months in which there is some economic slack (when I receive the bonus or bonus, for example) and months in which we will be more adjusted. Doing it this way makes planning easier and lets us know when we can “save bread for May” or when I will need to adjust my expenses or take advantage of my savings.
Anticipate potential financial difficulties
What is the relevant budget, that of the year that ends or that of next year? It is advisable that we consider both, although with special emphasis on the next year. The budget of the year that ends is rather like our financial statement because it is already executed, but it allows us to see how we are closing the year: what debts we drag, how much we have been able to save, etc. Instead, the budget for the coming year allows us to anticipate potential financial difficulties and even plan how to save when we have surpluses.
Should I prefer to save part of my gratification or rather cancel my debts? First, it depends on how stable my future income will be. If they were not, canceling debts is a good option. On the other hand, the decision depends on my opportunities: if my debts are at low or reasonable rates, and at the same time my investments get good rates, there would be no hurry to pay the debts before. On the other hand, if my debts are expensive or if I have many, then it is best to pay off part of them.
Family budget is first and foremost a planning tool
In short, the family budget is first and foremost a planning tool. It allows us to know if we spend a lot and we could spend less (in what areas?); if we need to generate more income; if we should reconfigure some of our expenses (eg paying less interest on debts by changing financial entity) or if I can save to reach my goals. Once I know my current reality, I can ask myself what I can do to improve it.
Some suggestions and recommendations to better elaborate your budget:
- Do it as a family exercise. Everyone can learn from him; but they will also better understand their financial decisions (good financial habits).
- Include all your income and expenses without exception:
- In the case of income, also consider non-regular income, provided they are predictable. Otherwise, be very conservative and do not fully take into account what is subject to certain events (bonuses or prizes, for example). Also, remember that the interests or returns paid by financial institutions are also income.
- In the case of expenses, be sure to consider the so-called “ant expenses”; that is to say, those who, due to their small amount, do not register them (tips that the car, coffee or soda in the morning, etc.) take care of, but that are recurrent and in the monthly aggregate represent a non-invaluable sum.
- When recording your financial expenses, take advantage to know the financial conditions of your debts (interest rate, administrative expenses, terms, etc.), as well as your savings.
- Once you have specified all your expenses, evaluate which expenses might be dispensable. This will give you a good clue about how to get some surpluses.
- If one of your goals is to save or save more, then stipulate how much is the amount you want to save, and define it as if it were an inevitable obligation or expense.
- If you are not sure of some amounts to be recorded, use your experience to include approximate data. Remember that you can always change the numbers when you have better information