Control of the family budget has always been for me in the first place in matters of financial management. I tried to stick with it until my friend, an economist, presented an alternative view of the value of family capital. In his opinion, the budget should not be considered as a starting point for managing cash. An effective financier, even at the household level, should come to the forefront of the concept of cost planning.
What is the difference?
The question immediately arises: what, in fact, are the differences between budget control and an expenditure plan? At a minimum, these are related things. However, in practice, the difference in approaches will be obvious. So, sticking to a budget means focusing on spending limits wherever possible. The purpose of this financial management is to preserve cash. In a situation with planning expenses for a person there is no budget value, but there is a priority of reasonable expenses.
Benefits of Cost Planning
Optimization of cash spending can be compared to diet. A person refuses to take food, which causes a feeling of hunger and can negatively affect the psychological state. But at the same time, the principle of saving applies. In the case of the budget, the same self-restraint mechanisms work that can cause stress and even a state of depression.
On the contrary, the plan of expenditures aims at rational parting with money, which by itself is perceived as a reward. Whether it’s a major acquisition, repayment of loans, building a house or a tourist trip - all this works as a plus, concentrating more and more attention on future useful expenses and motivating to find ways to increase profits.
How to plan expenses?
It is important to emphasize that the rejection of the principles of maintaining the budget does not mean a waste of money as they arrive. This is a whole planning system for both the short and long term. For weeks, months, and even years, it is necessary to make lists of articles on expenses, as well as large purchases, for which it will be necessary to save money.
Technologically, the task of forming a plan is solved using special programs and applications. You can use both universal office suites and specialized schedulers and task managers for smartphones. The main thing is that the lists reflect the time schedule, a description of the costs, their approximate volume in monetary terms, etc. For effective monitoring, it is desirable to provide classification and prioritization functions - this is also an effective tool for rational cost management. Ultimately, the plan will show how much the goals correspond to financial opportunities.
Positive effects
Applying the tactics of cost planning on the advice of a friend, already in the first months I felt a great relief from the realization of the benefits of this approach. One of the main advantages was that the emphasis on expenses practically did not increase the volume of my spending, but there were more acquisitions, albeit not by much.
The secret of this strategy is that accounting for money does not lie in the plane of optimizing the costs themselves - it focuses on how to produce them. For example, if you always adhere to the budget, then money management will occur according to a simplified scheme with an emphasis on saving. In the cost planning system, the question of how this or that acquisition should be made comes to the fore.Accordingly, the entire plan focuses resources on achieving these goals. This approach forces us to change our lifestyle in some way - but not for saving as such, but for the sake of improving the quality of life, including through valuable acquisitions.