How should the family budget look and why we should deal with it

Finance plays a very important role in a human life. When regular monthly income comes to the account, do you know how to handle it? This is the topic of today’s article.

Each budget could be divided into two basic parts. The first, mandatory expenses and the second part is all other payments. Mandatory expenses are payments, that you must send, for example, rent or installment of your own living, food, and transport to work. Other payments are extra and set the standard of living. The question is if you want to adapt to your finances or want to keep your finances always adapt to your life situation.

It often happens that after everything has been paid, will remain on your money account just a few money. It is possible to compare with the so-called rat race (cf. video below the article). So, how to get out of it?

The way surely exists and it’s not too complicated. The most important thing is to follow the basic principles of working with the family budget, which should be ideally divided as shown below. The graph below shows us, how to cover every sector and make some financial reserve. So when in your life an unpredictable occasion occurs, for example, your washing machine go mad or your fridge will get the fever, you will have enough money to buy a new one.

No matter how much you earn, it’s important how much you are able to save each month. Of this saved money you can generate other finances that are able to work on their own. It’s like gardening. In the spring you plant the seed, in the autumn you harvest the crop.

So how should my budget look like?

How should we imagine it?

Consumption Complete expenses on running your household and yourself. This is mainly food, clothing, but also hobbies, entertainment, sports, culture and completely all money that are not covering the housing.
Housing It includes the full cost of living. So rent or mortgage and energy, garbage fees and property insurance (real estate, household, responsibility).
Securing These are all payments, whether life or non-life, such as compulsory insurance liability, accident insurance, employer liability insurance, and so on.
Reserve creation Finance for unexpected spending (electronics), or loss of employment, some health loss. Simply a basic financial pillow where you can find support when needed. It is important that this amount was available within a few days on your current account.
Medium-term goals You can include anything you want to buy in this category, but you have not enough money to afford it. As the main stones, I take the building of property, or even car, savings for children to study or support to start their independent life.
Rent Throughout your life you set up a level of living standard. It means just how you live. The goal is, that you have been able to keep this level even at an advanced age.

The practical use

Now we need to move from theoretical to practical use. Everything always starts with a well-balanced family budget and consistent work with it over the course of time. Not for a single week but also for several years. Just because you have a detailed overview of your finances financial planner is able to make the right financial plan setting for you. All of us have an estimate, but the numbers are always more accurate and can always find the right path for everyone.

The first step is definitely to start and then the next step is don’t give it up. The start is always the hardest, but to it even more demanding. Today there are plenty of mobile phone applications to help you. Mostly we have a phone with us and when we buy something, it’s a matter of time to write down the purchase into the correct box in the application. You have to write down every purchase, even if you buy a lollipop to your child. Here are two links to applications for Android and iOS phones. If you are not a supporter of applications, so here is an excel table with instructions inside to use it.

Below you can find two links to applications for Android and iOS phones. If you are not a supporter of applications, you’ll find there an Excel table instead (with instructions inside on how to use it). You can enter regular fixed payments (rent, utilities) in all options and further work with it and enter individual spending items.

In addition, I recommend entering the default values for your accounts and cash right at the start of the mobile app. This is because the apps are able to show you the immediate balance of funds you have available, so you don’t have to look in online banking or wait for your bank to post your card payment. At the same time, the apps are able to give you an accurate report of your spending and help you set up an adequate financial plan.

Apps

Apple Store – https://itunes.apple.com/us/app/money-pro-personal-finance/id918609651?mt=8

Google Play – https://play.google.com/store/apps/details?id=com.ibearsoft.moneyproandroid

Google Play – https://play.google.com/store/apps/details?id=vopo.easyhomefinance

Excel table zde.

Video

See Robert Kyosaki’s explanation of the rat race at this link.