Personal Finance Management. Init

Greetings colleagues. Finally I’m here to discuss rather boring still necessary thing. It’s named personal finance management. I’ve some experience with that and here am I to share it with my dear readers.

Why?

Reasonable question for a huge part of humanity while they don’t have enough money to manage. As they state at least. But the main thing I can say. If you’ve more then 5 places to spend money within - you’ll never know where they are going without proper accounting. It’s not the rule I’ve got this from plain personal experience. While this kind of things is crucial for any further financial development. And not only financial even professional as it takes some money for a start at least. I hope that this boring part would persuade you to start thinking about the finances you posses and how you spend this resource.

Where should I start?

So if my persuasions had any effect and you’re here to change something. The first thing you should start with is to track all and any of your expenses with proper description. The main purpose of it is to make your spending thoughtful. The first step is done. You’re the 80% by the goal to understand what’s going on with your’ finances if any your transaction has category and meaningful description.

What’s income of mine?

It could sound rather weird but in my case I’d no idea what is my real income for a while. I’d the wage which I got once a month and some additional income from some additional jobs like part-time and freelance. And it was rather tangible amount from 10 to 15 percents each month. So I’d highly advice you to track income too. As income tracking with expense tracking would allow you to come to next stage.

What all those above for?

All the things discussed above is just to get some data for further analysis. All those boring and time consuming things you’ve been doing for a while was only for data gathering. They’ve some pedagogical effect still data is on a first place.
You should review your reports on monthly basis as the month will be the smallest discreet time unit of planning. For a first few times that would be great to check the transactions in categories which you’ve the most expenses within. I’m more then sure that some useless transactions could be found there (do you remember meaningful descriptions?). It’s highly advised to check category which stands for groceries as a lot of us make them-self happier with some small tasties.

Budgeting

The composition of income and expense tracking with a bit of planning based on previous experience added for a better taste. The main purpose of budgeting is to set the strict limits for each category of expenses. And as result the limits for overall spending for a period. So here it comes to the real things with a real impact on your life.
The budget sets the limitations for the expenses and you can start paying wage to yourself (this word will be used further to refer to the wage paid to your self only). And the amount of wage should match the budgeted amount. Here you’ll start feeling the difference which we’ve been coming to. It’s the fact that you’ll be no more dependent on paycheck dates. As you’ll have the some buffer you’ll get money from which will be just deposited by your paychecks. And this buffer is about two things. It’s about something called “Fuck you money” and about the breaking dependency on paycheck dates. If everything was done correctly and obvious things like the fact that you should not spend more then you earn was not ignored your net worth should increase by it’s own if your outcome is not greater then your income. Bellow you can see small diagram displaying what was I talking about here.

Buffer?

Here we steps into the topic I’m still getting into. Still it’s possible that I’d share something useful for you.
The buffer - key concept I’m relying on my finances currently. It’s the separate bank account which contains 3 average wages in average with adjusted for the possible difference in your financial schedule and income dates. And the main idea of the buffer is to give you a bit more freedom in your financial decisions.
Previously “Fuck you money” concept was recalled. And the main idea of it is that you can stop dealing with human beings you don’t like if money is only thing connecting you without thinking of money.
While buffer is not the “Fuck you money” in it regular meaning as it contains assets only for a 3 month of life at most. It gives you free breathe because at least you’ve understanding that for at least 2 month you’re free to do anything you want.

What’s about savings?

It’s simple to implement savings here. Personally I’m saving the most of the excess money. Those one which are excess for the average wage which should be added to buffer. In scope of this article it should be enough. Still saving is wide topic which will be discussed further

Some small pieces of advice

• Do not use those fancy applications for a phone. They looks fine while being useless
• Think out about categories you create to keep balance between details and ease of use
• It’s preferred to use PC for most operations. While phone should stand just as companion. To track something which will be forgotten, like cash transactions