Although financial management is not taught in most educational pathways, it remains a discipline with which almost everyone is confronted during their life. Here are some statistics: approximately 58% of Americans are not affiliated with a specific retirement plan and must manage their money on their own after retirement . Thus, while it is widely accepted that retirees must have a minimum of $300,000 at retirement to support themselves, the average American actually has only $25,000 on his account . Moreover, we must connect this statistical reality with the fact that the average debt contracted by households through credit cards would be around 15,200 dollars . If this information seems alarming to you and you don’t want to find yourself trapped, take the time to read on, you will find some suitable advice that will, we hope, make you meet a better destiny.
1- Build capital
For a month, keep track of all your expenses. You don’t have to limit yourself here, just get an idea of what you spend in a month. Keep all your receipts, keep track of what you need for credit card expenses, and figure out how much you have left when the month comes to an end.
At the end of the first month, take stock of what you have spent. It is not a question here of recording what you would have liked to spend, but what you actually used. Group and categorize your expenses in a consistent way that makes sense to you. A simple list of your monthly expenses should look like this.
- Monthly income: €3,000
- Rent/mortgage: €800
- Household bills (Gas/electricity/cable, etc.): €125
- Grocery: €300
- Restaurant: 125 €
- Petrol: 100 €
- Medical emergency: €200
- Disposable income: €400
- Savings: €900
- Now write down your actual budget. Based on the expenses made during the month (using your expense history), determine the share of your income that you wish to allocate monthly to each category. If you wish, you can use an internet-based budgeting platform (such as Mint.com) to guide you in your work.
On your management sheet, make separate columns to highlight the “estimated budget” on the one hand and the “actual budget” on the other. Your forecast budget is defined by the amount you want to allocate to each category, the forecast operation being done at the beginning of the month. The actual budget is defined by the amount spent during a given month, its value fluctuates from month to month and is calculated at the end of the month.
Many are those who give an important place to savings. You don’t have to organize your budget to specifically include a place for savings, however, this mode of operation is generally seen as a positive. Professional financiers advise their clients to set aside at least 10% to 15% of their total income .
Be honest with yourself when it comes to structuring your budget. This is your money, it would probably be foolish to lie to you about what you intend to spend. The only person who is likely to suffer in the end is yourself. On the other hand, if you have no idea how you are spending your income, your financial management can take several months to set up. Also, you need to keep in mind the importance of avoiding the trap of overly bold predictions unless you are sure you can do it.
For example, if you have 500 euros allocated to your savings every month and that, to achieve this objective, you must indulge in some deprivations, you should in no case revise your forecasts downwards. Set yourself a realistic limit in the beginning, then search through the different categories for exactly where you could fine-tune your spending to achieve this.
Keep track of your spending trends. The hardest part of managing finances is the variability of your expenses from month to month. It is therefore important to keep track of the fluctuations in your movements in order to get a clear idea of the sources of expenses over the year.
- Structurer votre budget vous éclairera sur la façon dont vous dépensez, si du moins vous ne le saviez pas encore. Nombreux sont ceux qui, après structuration de leur budget, se sont aperçus qu’ils pouvaient mieux utiliser leur argent et qui ont pu concrétiser de jolis projets. Cette connaissance leur permet d’adapter leurs habitudes financières et de reporter leur argent vers d’autres sources plus intéressantes.
- Un plan pour les coups durs. La structuration d’un budget vous permettra de réaliser que vous ne savez jamais quand vous avez à payer une facture inattendue et qu’il faut toujours être prêt à se préparer à toute éventualité. Nous ne parlons pas ici de prévoir un plan spécifique pour une panne de voiture ou pour les frais médicaux de vos enfants, mais simplement de mettre de l’argent de côté au cas où ses éventualités venaient à se produire.
2- Spend your money better
When it is possible for you to borrow or rent a property, it is not necessary to buy it. How many times have you bought a DVD so that it then becomes, for several years, a dustpan? Books, magazines, DVDs, tools, party supplies and sports equipment can all be rented for small sums. Renting often saves the hassle of maintenance, it saves you space and it saves your budget for the purchase of the best items.
- Do not rent blindly. If you use an item regularly, it may be best to buy it. Make a simple cost comparison to determine which is the most advantageous solution of buying or renting.