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How to Start Planning and Managing Family Finances

Written By: admin on March 30, 2009 No Comment

1. Sit in front of your computer or an old fashioned notebook and make sure you have a few hours to spare.
2. Estimate your monthly income and expense. Divide expenses on regular and extraordinary. Include all expenses, even those that are not as “serious” as paying back your loans. The main criteria is to include expenses that occur every month – for instance if you buy yourself a new perfume every month, it should be included as expense. For a start try being as realistic as possible and include all expenses. Expenses that occur only once a year (i.e. car insurance) should be allocated to all 12 months and each month should include 1/12 of the yearly expense. When estimating expenses you are allowed to “go wild” and overestimate them, while with the income exercise some caution. If you received a huge bonus last year, don’t plan the huge bonus for this year. Plan a minimum, and if you receive more you will be pleasantly surprised.
3. Deduct expenses from income. The difference is either positive or negative. If it is positive, the difference is a surplus that can be either invested or saved. Seek a professional investing advice before you make any decisions. If the difference is negative, you have to start a serious analysis of your expenses. Analyze monthly expenses and find areas in which you can lower your expenses – search for some advice.
4. Daily spend few minutes writing down your income and expense.
5. At the end of the month compare actual expenses and income with the plan. It is very important to be honest to yourself because it is the only way in which you can create a realistic spending plan. Good plan is always changing as the life is changing, so don’t be afraid to change and improve your plan.

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