There is almost no person who has not wondered at least once where his salary money disappeared. To avoid debt problems and learn to live within your financial means, learn to control your money.
In order to achieve personal financial success, it is extremely important to learn how to manage your own spending. Consumption decision making is a 4-step process
- recognition of need/desire
- seeking information
- identifying and evaluating different options
Avoid debt problems
Different people approach consumption in different ways, so very often, due to impulsiveness, low self-control, etc., they skip some of the above steps and immediately go to the last one, or to make a purchase.
A personal budget is a basic way of managing to spend efficiently. It is a major instrument in personal financial planning that will allow you to control your day-to-day expenses.
Budgeting actually means spending every dollar of your paper receipts before the month even begins. Still, creating and maintaining a budget is not easy. Many individuals manage budgeting compared to keeping a diet. Just like dieting, budgeting is often associated with deprivation, waiver, and reduction.
However, creating and maintaining a budget does not have to be painful. Rather than having a diet, try to think of your budget as a camera that lets you see the real picture of your personal finances and your own spending habits. Here are some guidelines for successful budget creation and management:
Keep your budget simple
Although budgeting is a tool used to plan and manage personal finances and therefore needs to be detailed, it can very easily become overly detailed and therefore extremely complex and tedious. The hardest part of your budget is respecting the limits you set yourself and constantly recording all your expenses.
That is why it is important that the boundaries are as realistic as possible and that the budget is as transparent and simple as possible so that you spend less time daily.
Make a budget for a period long enough to see results
It is desirable to make a budget for the period “from salary to salary” or for one month. In addition, it would be good to put together an annual budget.
Specifically, a month-to-month budget can adjust your daily living expenses and bills, but an annual budget will help you plan for bigger and less frequent expenses, such as going on vacation or other important expenses that are better viewed as annual expenditures.
Create a savings fund for the black days
The Black Day Savings Fund should be an essential part of any budget. It can help you finance unexpected expenses like medical bills, big car breakdowns, job losses, etc.
If you have a savings fund for the black days, you won’t have to borrow from unexpected events because you’ll have money to finance unexpected expenses or your own regular spending if you lose your job, for example.
It is advisable to save enough money in the fund to fund your regular spending over three to six months. Once this is achieved, your financial stability will be much higher with any major expenditure, and your budget is almost at risk.
Don’t despair about keeping track of your spending
Daily monitoring is often difficult and tedious. However, you have different ways of tracking, and your job is to find the one that works best for you.
Whether it’s a personal planner, an Excel spreadsheet, a mobile app, or a specialized online budget management program, it really doesn’t matter. The only thing that matters is that you choose the method that works best for you.
Get the whole family involved
Whether your budget affects your spouse, partner, or children, it is crucial that everyone is informed about the financial plan established. Namely, if there are two or more people in the same household with significantly different attitudes about money, sooner or later problems will arise.
You need to be aware of other people’s views on money and understand that your views are not the only one or universal. For your financial plan to be successful, it must reflect the views, needs, and desires of all members involved in its execution, and everyone must be informed of the steps that must be taken.
It is also important that you try to be open with your loved ones and keep them informed about your financial goals. This way you can come up with a support system to help you when your self-control is reduced. In such situations, loved ones may warn you that you have promised to control yourself and keep an eye on your spending and force you to take responsibility.
Make adjustments to your budget via
If at some point you realize that your priorities and goals you have set do not fit the reality you are living, assume that your plan is ready to change.
It is important that your goals are always aligned with your financial capabilities, and that the priorities you set really matter at that moment. Everything else will get you in the path of financial trouble.
Try adding instead of just reducing
Budget management usually involves managing your spending and reducing and cutting costs. However, if you notice that spending cuts are not enough to get you in the path of financial success, think and look for ways to increase your cash flow.
Find extra work, sell some of the property you own. Specifically, individuals often think of only one side of the equation, and there is another side you can also influence, whether it is temporary or permanent.
Let failure not be your solution
Keep your cuts moderate. If you enjoy two coffees each day, do not get two coffees a day for a single coffee. Gradually make the cuts because no one wants to stick to a budget that deprives him of every form of entertainment in his life.
However, remember that sacrifice is part of the successful management of personal finances, and that sometimes in the present it is often necessary to say “no” to yourself repeatedly so that we can say “yes” in the future.
In addition to creating a personal budget, it is important to constantly develop a responsible and positive attitude toward personal finance planning, and to identify (most often psychological) factors that affect how you dispose of your finances and make spending decisions, in order to achieve financial success and gain control overspending.