Do you have a personal (or family) budget and do you know what your monthly expenses are? Maybe you only think about this topic when your salary is not enough or when you apply for a loan at a bank and they tell you something like, "The total amount of all your obligations related to loans or leases should be up to 50% of your income."
So everyone knows where most of their income went - the loan payment, the lease, the heating, the electricity... These "planned" expenses represent (in a good case) up to 50% of your income. But where does the other half go. For food and miscellaneous stuff. Yes, but for these small expenses 20-30% of your monthly budget ends up going.
And do you know what your annual expenditure on medicines are? If they are more than 300 euro, isn't it better to buy a package that covers them from some health insurance company, for a much smaller amount. How much money do you spend per year on a car wash? Wouldn't it be more profitable to buy a steam cleaner that you can "knock out" in 6 months. If you have answers to these questions, then you are doing well with your personal finances.
But, if you can't answer, don't worry. I'll suggest a few simple steps to get you started: Step 1. Start recording your expenses
The fact that you collect all the bills in a special folder in the mail or put them in that shoebox doesn't count. The easiest way to start this is with Word 1.0 (i.e. a piece of paper and an pencil). You can also use a notepad. The other option is to record them in an excel file or one of the many personal finance websites.
Step 2. Prepare a monthly budget
Once you've recorded all or most of your expenses, you start to notice some patterns in them. You see that your food expenses are, for example, 500 euro and your fuel expenses are 150 euro. So what? Well, now you are ready to move to the next step - making a monthly budget.
You can start from your income then expenses. Once you include all fixed and relatively fixed expenses you move on to recurring expenses. These are those that are paid over some period greater than one month.
Now it's the turn of the rest of your expenses. The biggest of these is probably food and drink expenses. Although each month is different, if you've kept track of these expenses for a minimum of 2-3 months, you'll see how they should look like. Write them down, too. This also includes the cost of fuel for the car, newspapers, magazines, cosmetics, etc. Finally, you record some amount for incidents, such as medicine costs, car repairs, etc.
Step 3. Data analysis
If you've completed the previous two steps, you're already doing better with your personal finances than 80% of the people. Now I'll tell you how to get even better. Let's start by analyzing your spending. You can breakdown the expenses by category in a pie chart, which is very useful for initial analysis. What's that big orange chunk? Surprise, it's your spending on cosmetics or on newspapers and magazines
The other type of analysis is trend analysis. This means seeing how your spending in a particular category is moving by month. Here, you can use a bar graph or better yet a broken line graph for greater clarity..
The other analysis you can do using the data is related to your monthly budget. Ideally, your actual expenses should be the same as your estimated monthly budget. But this is very rare. So here, the more important thing is to track the percentage deviation from the plan. If it is up to 10% it is within reason. If the deviation is more, look for the reasons and whether the amount of that category should be increased or decreased.
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