Lean and economical people are less likely to be in debt, plan their budget more efficiently and are generally perceived as more mature in financial matters. Their opposite is spenders who do not see the point in long-term savings and live today, providing themselves with everything they need as the money comes. It would seem that completely different approaches to financial management, excluding any combination. But in fact, they can be combined, as a result of which the minuses of both strategies will disappear and only the pros will remain.
Assessment of financial position
Regardless of what kind of money management tactics a person adheres to, he must initially conduct an audit of his budget. It is important to understand what means can, in principle, be operated taking into account income. If we are talking about stable work in a reputable company, the situation is simplified, as there are opportunities for long-term planning. The situation is different with irregular incomes. In this situation, it is difficult to count on achieving goals that require large investments.
Statement of financial objectives
The next stage is the setting of those very goals. Both cost savings and balanced tactics of expenses can be used as a means of solving the tasks outlined. What can be the goals in principle? Everything from buying household appliances and organizing a gala event to changing your place of residence with the subsequent purchase of a home. Moreover, the creation of our own business, which in the future will affect the nature of financial management, can be considered as a task. The concept of cash savings in this case will work only at the initial stage, and in the future, significant expenses associated with the launch of entrepreneurial activity will be required.
Cost optimization
Achieving financial goals will require a cost-saving mechanism. The speed of completing the tasks will depend on its implementation. The main tool for saving will be cost optimization. In particular, many families practice the idea of eliminating all expenses that are not related to the purchase of items of current necessity. For example, food, utility bills, supplies, and unforeseen emergency expenses will form the basis of such items.
The saving period is determined on the basis of the rate of accumulation of sufficient funds to solve the intended goals. It can be a month, a year or even several years, although it will hardly work for a long time to save in this mode. A balance should be found in compiling a list of compelled expenses, taking into account secondary needs. Savings should have reasonable restrictions that do not allow to reduce the overall quality of life to a critical limit. These frameworks are usually determined taking into account the value of the goals set. Indeed, it is one thing when it comes to paying off a loan, and another thing if you plan to buy a new car model to replace the old one.
Spending management
Purchases and large acquisitions alone should not be considered solely in terms of damage to the family budget. In addition to the need for certain expenses, it is important to consider the effect of rationality. Saving is not always beneficial in the long run. For example, money can be invested with the possibility of receiving dividends or spent on a purchase, which after a while can be more expensive.Once again, spending on your own business will be a good example. This is an unconditional burden on the budget, but it will ultimately help to radically improve family welfare.
The revision of the practice of saving and spending money should be based on the principles of appropriateness and balance. No strategy with a focus on spending or saving money will not allow you to effectively manage your budget. In some situations, saving is justified at some stage, while in others, well-adjusted tactics of expenses and investments. The ability to determine these balance points will certainly give positive results when money will be beneficial, and not become a cause of crisis situations. And of course, all the main participants in budgeting should be involved in financial planning.