How do I make a budget?

 When you make a financial decision, you need a record, a budget that shows your current situation and helps you make a decision, whether it is to invest or to spend. And how do I make a budget?

A budget is made up of records of income and expenses. Income can be represented by both active and passive income (generated as a result of an investment) and by fixed or variable expenses.

 

Budget and personality

Each of us has a different personality. You are different from your life partner, your parents, your best friend. We also have different personalities from a financial point of view. Someone keeps their budget in Excel, someone else writes it in a diary, and another person uses a budget management application. No one is wrong, it is the right approach for them.

If you want to find the right option for you, you need to analyze your personality.

I don’t keep a budget. I only had a budget for the company, but I quickly applied the behavior in my personal life: minimum 40% – maximum 50% of income set aside in savings and investments, and the rest is spent. First of all, spend what is fixed: bills, contributions, then what is left goes on things that bring added value (desires).

 

What does a budget look like?

Template

 

A budget keeps track of all income received, as well as all expenses, both fixed and variable.

Fixed expenses are most often represented by bills, subscriptions and contracts that require us to take a fixed monthly amount out of our pocket. They are part of the category of needs. We pay for electricity, installments/rent/maintenance, telecommunications, school fees and food. There are also fixed expenses that do not have the same frequency: such as insurance or clothing/shoes or personal care products or medical treatments.

Most of the time, expenses that are not monthly tend to upset the budget in some months.  Therefore, I recommend that that expense be divided by month, a monthly average be made and there is an envelope in which the money is allocated. Ex. CASCO: 1200 lei / year represents 100 lei / month. Such a division also leads to discipline and responsibility regarding your money, as you will discipline yourself not to spend it on anything else and to take responsibility for your financial life.

Variable expenses are those related to desires: outings, lifestyle, vacations. They are the ones that, most often, have the highest level in a budget. In order not to affect other spheres of financial life it is also necessary to foresee and plan them. A thorough, balanced planning leads to satisfaction in your financial life. The word: “giving up”, in the idea of ​​budget and financial life, is not a positive one. Planning your expenses and the optimal level of allocation or other expenses in the category: variable, extra expenses leads to a balanced and satisfying life.

 

How do I manage my life and financial goals?

First of all, you start from what you want, from why keep a budget? No one wants to keep their “personal accounting”, as is the case with accounting in the legal sphere, if they don’t have to or don’t see the benefits. It is necessary to find out what you want in order to reach the need to have a record. This record does not have to be kept month after month, as long as you have created some automatisms, such as dividing your income, so that you have money for bills and mandatory expenses, optional ones, for desires and for short, medium and long-term financial goals, respectively savings/investments.

A well-made budget is a “zero-based budget”. What does it mean? It means that you have divided your money into all areas of your life so that you end up with not a single leu left, but be at peace, satisfied that you have all the spheres of your financial life, you have covered: your needs and desires in the short, medium and long term.

How do I make a balanced budget?

Once you have established the level of each expense, even if it is in the category of desires, and you set aside the necessary amount, you end up having a balanced life. For example: you want 2 vacations per year. You establish the financial level of each vacation, add up the amounts and divide by 12. Each month you set aside the amount necessary to have the money to go on vacation. You also establish the amount necessary for going out or hobbies.

You establish the amount necessary to be fulfilled and which is, at the same time, in balance with the entire budget, so that that amount is expressly allocated for outings or hobbies. And the personal development area in which we include: courses, books and the events area in which we include: weddings, baptisms, birthdays, holidays (gifts) or unforeseen expenses, the so-called: “unforeseen expenses” because you can foresee the fact that every year you change the tires, the car may break down, you establish an amount, the same, divided by some frequency: it does not necessarily have to be 12 (a car should not break down every year) is set aside and you end up with that budget at zero.

How do I make a budget for savings and investments?

Let’s not forget about savings and investments! Most of the time, “unforeseen expenses” are included in short-term savings or emergency funds. You determine what your short-term, medium-term and long-term goals are and allocate an appropriate amount. You also plan for unforeseen situations, those that can upset your plan. For example, when planning any goal, it is necessary to take into account the emergency fund of 2-3,000 lei and the financial security fund for 3-6-9-12 months in the context of being left without income or having health expenses.

To achieve short-term goals, because time does not help you, you allocate more money. The allocated amounts are smaller in the long term. In financial life, we use time and money to achieve the proposed goals. We use investments for medium-term and long-term goals, while, to achieve short-term goals, we use savings.

The financial situation differs. The percentages differ, but one thing is generally valid: the way you use your money. If you “pay yourself first” you will end up having money and being financially fulfilled. I invite you to follow Family Budget for a family spending plan. https://bugetdefamilie.ro/

Success in becoming aware of money and the importance of a budget!