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Hope for the Best, Prepare for the Worst

Written By: admin on May 16, 2009 One Comment

There are pessimists and optimists. Regardless of whether you are a pessimist as a person or an optimist, in planning home finance one needs to stick to two basic rules:

1) when you plan for revenues be a pessimist and reduce them as much as you can
2) when planning expenditures be “optimistic” and increase them as much as you can
Real life examples
Example 1: I work in a company that has a fixed and variable part of salaries, of which variable part serves as a reward, but in my work contract only a fixed part of my salary is mentioned. For last two years I have a good boss that constantly gives me maximum variable part of my salary (and it is a huge privilege since only 10% of employees are entitled to it. My boss retires in March and a colleague that does not like me particularly will then become the new boss. I am not thinking of a job change because I like my current job, but I can expect that the new boss will not be so generous to me as the previous boss. How to plan my income?
When planning your revenues, your current salary should be included for first two months, and only the basic salary for other months. In this manner you will have a realistic and flexible plan and a possible additional income if you receive variable part in some of the other months.

Example 2:This year I do not want to invest in the apartment and home appliances, I have little amount of money and I can’t afford it. Do I have to plan for something in relation to these expenditures?
In the planning of expenditures related to the apartment and home appliances, consider the situation and status of your household appliances and installations. In fact, furniture can be used if it is old and worn out, but if your washing machine breaks down you need to do something. In the best case scenario, you must call the handyman to repair it. If your washing machine is over 20 years old, and it can realistically be expected, that it will break down during the next year, plan the adequate amount for purchase of the new washing machine. Check the lowest price you have to pay for the new machine and plan accordingly. Take into account that even if your appliances and pipes are new, it always possible that something will break and try to plan for possible expenditures. You can decrease your risk with the home insurance so make sure that you enquire with the insurer if necessary.

One Response to “Hope for the Best, Prepare for the Worst”

  1. Kelly Brown says on: 13 June 2009 at 1:55 am

    Hi, very nice post. I have been wonder’n bout this issue,so thanks for posting

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