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If the review of your spending habits is positive and you have income left at the end of the month, congratulations! You can now start to plan how to best invest your surplus money to generate additional income. It obviously depends on your personal situation, but earning more than you spend – even if it’s just a small amount – is crucial. You should identify expenses that are not necessary or where you could switch to eg. Which habits could you change in your daily life to lower your expenses and to spend less? Adjusting your spending habits as quickly as possible will save you a lot of trouble later on. Carefully look at all the details in your spending list to figure out where you are spending too much money to find out where you could spend less. Are you possibly spending more than the money that is your income? If your expenses amount to more than you actually have incoming, this is known as going “over budget”. Now it is time to review your spending habits in close detail. Setting up a household budget and making sure you stick to this budget may ease a lot of the anxiety that managing your money may be causing you. The figure will hopefully be positive, meaning that you are not spending your entire income, or more than your actual income. Now you take the sum of your income and subtract the sum of your expenses that you have added up and write down the amount, regardless of whether it is positive or negative. Finally add up your income and add up your expenses. Look at the amounts you spend every month on each item and write them down for each item. Don’t forget to include expenses that you do not have every month but maybe in other intervals.
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Review all transactions - incoming and outgoing - in these statements. Looking at one average month (or more if you want) of spending, use the amounts you typically spend as reference values. Personal grooming (cosmetics, vitamin supplements, etc.)Īfter you have made your lists, you are going to need your bank statements and credit card statements. Utility bills (electricity, water, heating, etc.) Repayment rates for loans and debts of any kind (such as bank account overdraft or credit card bills) Payments for rent and utilities/mortgage on your house Some examples of expenses - money flowing out - are:
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Social security payments and transfers of any kind you receive from governmental authorities such as family allowances and pensions Income from renting out any real estate that you are the owner of Royalties you receive from others using your intellectual property (such as music you’ve written) Passive income (such as royalties from books that you’ve written) Income from your investments (such as dividends from shares) Income from side businesses or additional jobs Salaries and wages you get regularly and reliably from working Some examples of income - money flowing in - are:
#Household budget example free#
As there is no right and wrong in setting up such a list, feel free to adapt it to your own needs. There are also lots of free spreadsheets available online which you can adjust to your budget needs. The best way to get started is to sit down and to give yourself some time to think about all the ways you are generating income and all the things that cost you money - these are your expenses, or in other words, your assets being used up as liabilities.
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This is a great way of monitoring where you spend your money. Sit down and take the time to draw up a personal budget for yourself and your household. You only need a few things to start setting up and planning a budget for your individual household. Like you learned in lesson 1 of the Personal Finance section of the Bitpanda Academy, finances are one of the major causes of stress for many adults - creating a household budget and sticking to this plan may ease a lot of the anxiety that money may be causing you. Why should I be planning the finances in my household using a budget? By doing so you will also be able to figure out how much money you can potentially save and invest. This is a convenient and easy way of monitoring where you spend your money, to see where your income goes and which expenses you have. For instance, did you know that governments of nations set up national budgets structuring their spending? Just like companies that need to plan to manage their financial performance, it is important to take some time to draw up a personal budget for yourself and your household. Even if you have never heard of a household budget or even a budget before, money management plans are used much more commonly than you may think.