Tags: anticipated income, daily expenses, entertainment purpose, extra income, financial budget, financial crises, insurance instalment, investment, loan repayment, market research, personal income, personal insurance policy, retirement plan
If one wishes to live a debt free life then they must have control over their personal finances. Personal finance and debt goes side by side. When we talk about having a control over debt then one must manage their personal finance very nicely. There are 3 steps which one must follow to control their personal finance.
Add Up their Income
One must have an income check every month. One must never add their anticipated or extra income to their monthly as then they may affect their routine budget by doing this. Sometimes anticipated incomes can be delayed hence one should never depend on such incomes.
Add Up their Monthly Bills
One must go through the payments which one pays out month after month. Mostly these monthly bills like insurance installment, loan repayment & etc will remain same month after month. Whereas, utility bills changes according to the usage like water, electricity and etc. hence, one must make a rough estimate of such expenses in the beginning.
Add Up their Expenses
These expenses have to be paid but not on the monthly basis. This category includes food or gas expenses. Expenses like clothing, movies etc falls under this head.
How to manage the Personal Finance
After organizing the income, one must know how to manage them as well. One must know how to differentiate between their incomes from the expenditure. Salary & regular flow from investment is known as income whereas all the monthly expenses are known as expenditure. Expenses can be classified into many categories. Some of the common monthly expenses under which majority of people have to undergo are:-
1) House rent.
2) Utility bills like electricity bill, telephone bill, telephone bill, cable bill, internet bill & etc.
3) Installment of insurance policies such as home insurance, car insurance, medical insurance & etc.
4) Grocery bills such as vegetable expenses, food expenses & etc.
5) Payment of loan.
6) Transportation cost.
7) Education fee of children such as school fee, tuition fee & etc.
8) Miscellaneous expenses like movies, parties & etc.
Some of such expenditures are variable whereas some of them are fixed. Variable expenses keep on fluctuating every month for example grocer bills, miscellaneous expenses & etc whereas fixed expenses remains fixed that is it does not change every month for example rent bill, installment of insurance, loan payment and etc.
Balancing the budget
While making the budget one must keep some money for an investment purpose, some for entertainment purpose & like-wise. One must have a balanced budget so as to avoid the financial crises in the end of the month. Planning for a balanced budget one must fix their limit for variable expenses like holiday, or purchase of gifts, crockery or furniture. One must plan for their retirement as soon as possible but investing any where one must do thorough study or market research. It is very important saying that prevention is better than cure therefore one must plan for their budget so as to have a proper balance of the budget.