Basic principles of budget planning

Accounting for income and expenses. You can manage your finances effectively only if you know exactly how much you earn and what you spend your money on. Accounting for income in most cases is not difficult, which cannot be said about the time-consuming accounting of expenses. But here modern technologies come to the rescue, allowing you to quickly and accurately plan your budget. For this purpose, computer programs (eg MS Excel), cloud technologies (eg Google Docs) or smartphone applications (eg Easy Home Finance, Spendee) can be used. Or you can try to pay by card as often as possible: in this case, the time-consuming cost accounting will be taken over by the bank, and all purchases will be recorded in the Internet bank and available in the budget planner;

Analysis. After you figure out your income and expenses, you need to draw conclusions by answering the question of whether all expenses are justified and whether the current situation is acceptable to you. Often, the process of analysis brings surprises, because if you “figure it out in your head”, the amounts of expenses seem smaller and, as a rule, fall out of memory. In fact, it is small and seemingly insignificant expenses that form a very tangible amount at the end of the month;

Goals. If you see opportunities to improve the situation, you need to understand what and how you will do differently. You may want to sort out your bills and pay off any existing liabilities first. After this task is solved, you can safely take on the following goals, for example, start saving for a larger purchase, save for a rainy day, or take out a new loan;

Plan. To achieve the goal, you have to change something. “Extra” money in the wallet can appear in two ways: either you will spend less or earn more. The easiest way to start is by cutting costs, but as you know, they cannot be cut indefinitely. It is also important to consider additional income opportunities.

Actions. When the plan to achieve the goals is ready, start implementing it! Perhaps this is the most difficult of all steps, as it requires specific actions, but trust me, it’s worth it!

What is a family budget?

A family budget is a family financial plan for a certain period. It should indicate the estimated income and expenses of family members.

When should you start budgeting?

Right now. Even if you don’t have a spouse. Even one person is a household that needs a plan of income and expenses. For example, in Switzerland, a third of families consist of one person. The budget will help you clearly know your own financial capabilities.

What are the main items in the family budget?

Housing, food, transport, expenses for children, medical treatment, taxes (there are times when they have to be paid on their own). If you have a loan, write down the interest and principal costs. If you help relatives, then you need to take this into account. A mandatory item in the family budget is unforeseen expenses.

How long does it take to draw up a list of income and expenses?

For any convenient period, for example, a year. Budgeting each month is quite time consuming and can reduce the motivation to keep records. And long-term planning requires experience and great confidence in yourself and your partner. However, if you have many years to pay off your mortgage, then it is worth considering a plan for the entire term of the loan.

Will the budget structure change over time?

Yes. New items of expenses and incomes will appear. For example, it will be necessary to spend money on educating children, and at an older age, you definitely need to think about good medical insurance.

I earn the most in my family. Who should budget and plan expenses?

The one who will do it better, and this will become clear in practice. Of course, there is a temptation to declare yourself a distributor of earned funds. But not the fact that other family members will cope with this worse. Let everyone make their own budget. The one whose forecast will come true better will be able to become a family financial consultant.

How do you decide how much money each family member should contribute?

There are no strict rules on this matter, because this is a family budget, not a state one. But it is clear that this issue needs to be discussed in advance and proceed from the size of the income of each family member. The decision must be voluntary so as not to bring discord into the relationship.

And you definitely need to take into account that everyone should have some amount with them, which does not need to be contributed to the family plan, for which they do not need to report, so that everyone in the family has at least a little financial independence. At least for something you need to buy gifts for each other 🙂 Or if you have to make unexpected purchases that you can’t refuse, you can take them from your personal stash.

This year we will spend 20,000 hryvnias on recreation. Is it a lot or a little?

We don’t know your financial situation, so the answer is we don’t know. But since you are reading an article about the family budget, you are not going to plan your personal budget, but the family budget. So it’s better to forget about individual decisions. All major items must be discussed or communicated to those who have withdrawn from budgeting. Otherwise, you will have to spend a lot of time explaining why you cannot buy a new thing or go on vacation to Turkey.

How accurate do you need to plan?

As much as is comfortable. Display the budget to a penny – spend time accounting for all possible income and expenses and nerves to stick to the list. Agree on the margin of error so that it is comfortable for the wallet and the nervous system. And it will be 1,000 or 100,000 hryvnia – individually.

We are not sure about the amount of our income and expenses. How to proceed?

Be honest with yourself. If you are just waiting for someone to increase their salary, then contribute to the budget as much as you receive now. It is better to correct the painting on the fact of income growth than to live according to a plan drawn by fantasies or inflated expectations.

How to stop arguing about expenses?

Probably not. They are rare, but will occur. It is not important that you argue, but how the opposite side reacts to this dispute, whether it causes stress for a partner or for you.

We made a budget, but we couldn’t stick to it. What to do?

Think about why it happened. Made a mistake in the amount of income or expenses? Did you miss any of the articles? Or maybe you’re tired of sticking to the plan? Discuss the reason with the family and make a new budget.

The most important thing about a budget is to stick to it and not quarrel over money. For some couples, managing money together becomes a major challenge because they can’t agree on principles and how to spend the money. And here the most important thing is to hear each other’s wishes and explain their position. Why do you disagree that a girl or wife wants to buy a new laptop? Maybe she really needs it, because the old one does not pull Photoshop, and she is studying to be a designer? Why is she against your new pair of jeans? Maybe you already have a dozen of them, and yet it’s better to save this money for something else?