Planning is not an easy discipline, but it is very necessary when you have a scarce resource. Surely those days full of activities you have had to plan them in your agenda, in order to fulfill all your commitments. With money you should do the same. Planning financially will allow you to face your expenses, save to access new goods or services, and even invest.
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A financial plan will help you reach your goals. It is a powerful and flexible tool, which you can think of as a plot on a map. It helps to know where we are and where we want to go. Needless to say, if we don’t know where to go, we will most likely end up somewhere we didn’t want to go, such as over-indebtedness.
To develop a financial plan it is necessary to obtain information, make decisions, act, evaluate and set short, medium and long term goals.
Financial plans work well, as long as they are simple and realistically estimated with respect to income and all monthly expenses. In addition, they must be periodically reviewed and adjusted to reflect changes in market conditions and objectives. Sharing them with the family group, to carry it out together with them, favors the union of the family and contributes to the success of the proposed goals.
Check your monthly expenses
It is not easy to know what we spend our money on. To optimize its use or reduce expenses, we must know exactly what our income is and what we spend it on.
The best way is to create a detailed budget that considers all your monthly income and expenses:
- The first are your monthly fixed expenses, such as your home services (water, electricity, telephone, gas, etc.), what you spend at the supermarket, pharmacy or fair.
- Include the salary you pay to the person who cleans your house or takes care of your children, the cost of who cares for your garden if you live at home and common expenses if you live in a condominium or a building.
- Transportation and/or gasoline expenses.
- Expenses for tuition and monthly fees for colleges and/or universities. Include expenses for materials and your children’s allowance if you have them.
- Do not forget the installments of your debts.
Finally, remember to consider all unscheduled expenses, known as “ant expenses” that are not normally considered important, but can often cause serious imbalances in the monthly budget. This is the case of gifts, cigarettes, ice cream, drinks, junk food, tickets to the movies, theater or recitals, magazines, CD’s or DVD’s and impulsive purchases of clothing or home accessories.
So that you don’t forget anything, we have prepared the interactive “Monthly Budget” Calculator, a calc that groups all the expenses you need to consider and will help you analyze what percentage of your monthly income you allocate to each of them.
By recording all your expenses, you can take steps to reduce them. And you could also come to the conclusion that there are expenses that you considered unscheduled, but that have actually become fixed expenses that you must consider when planning, for example, clothing, medications, lunches or dinners in restaurants, tickets to recitals and night outings to bars or pubs.
Determine what your objective is
To formulate a financial plan, answer the following question “what do I want to save for?” Evaluate which goals are most important to you: buying a car, traveling, getting an education, being prepared for an emergency, having capital for your old age, acquiring a property, developing plan your own business, etc.
You must bear in mind that with very few resources some families agree to buy their house, save to educate their children or to live with dignity in their old age. If they can do it, so can you!