The ability to properly distribute available funds is the basis of economic stability, which practicing financiers recommend using when planning a home budget. His further financial prosperity depends on how rationally a person knows how to spend money.
Indeed, without knowledge of the economic foundations, a person who has even a very large salary risks becoming bankrupt soon. Extravagance and inability to rationally distribute funds are a kind of ailment - the lack of a certain discipline in controlling one's desires and the inability to calculate one's own financial reserves.
Often times, extravagant people cannot remember how much their money was spent on over the course of a week or month, let alone longer periods of time. The secret of squandering in this case lies in the fact that giving money to acquire certain goods, a person rarely bothers himself with the process of addition. After all, buying an insignificant and of little use trinket for a modest price, it is difficult to calculate how much this pleasure will pour out within a month or a year.
Daily personal bookkeeping allows you to develop the skill of long-term savings. A regular spreadsheet is fine for this. In it, it is necessary to highlight the columns for the amount of expense and the purposes for which the money was spent. Economists recommend subdividing each goal into categories: home, household needs, food, investment. Twice a month, on the days of advance payment and salary, it is necessary to bring together the total amount of expenses for the past period and the amount of funds received. The difference between these values is personal balance. The higher this indicator is, the more money was saved.
It is also a good skill to get started with personal bookkeeping in collecting receipts from all stores, gas stations, and other places where money was spent. First of all, checks allow you to compare prices for similar goods in different stores, and at the same time - allow you to structure costs.
When calculating your own profits and losses, you should remember that saving is only half the battle. What is important is what the savings will be used for. It is better if the balance is sent to deposit accounts, which allows you to establish a reliable stream of additional earnings.
It is necessary to move from the analysis stage to the planning stage. In the first month of observing personal financial flows, an average picture emerges of which spending is mandatory and which can be waived. For the next month, you need to plan the maximum amount of costs for each of the costs. You should not cut costs unnecessarily; it is better to strive daily to reduce the amount of funds spent for each degree of expenses.
The next step towards financial discipline is to keep track of all the cash in your wallet. It should be remembered that bank cards are often the main source of wastefulness, because they open up access to all funds in the account. It is better to abandon the use of plastic or replenish the card balance daily for exactly the amount that is allocated for a day based on the analysis of monthly expenses.
