How to keep track of personal finances – 10 rules and 3 ways

“I don't have money", “I can’t afford it”, “I am in debt” – how often can you hear such statements from relatives or become their author yourself? Of course, especially given the financial crisis, accompanied by rising inflation, a decrease in the purchasing power of citizens, the unpredictability of exchange rates and economic instability. However, the reason for the lack of money often lies not in external, but in internal factors. In particular, the inability to keep track of their income and expenses. This article will tell you about what mistakes people make when managing finances, what they can change and what rules you need to follow in order to normalize your financial condition.

Principles of sound financial accounting

So, in order to always have an impressive amount on hand, pay loans on time and improve your financial situation every month, you must follow six laws:

• plan a monthly budget (in particular, expenditure items);
• spend less than you earn;
• divide the income received into parts;
• look for opportunities for additional income or its increase;
• invest a small amount from each received USD;
• avoid loans, especially long-term ones.

Planning a monthly budget is essential to create a clear picture of your upcoming income and expenses. Based on it, you can estimate how much will remain for life, and whether it will be possible to invest some part at interest or just hide it under the pillow for a “rainy day”. If you have free time during the week, it makes sense to think about new sources of income. These may be:

• earning money from their hobbies (needlework, writing reviews, copywriting, repairing equipment, etc.);
• selling unnecessary things (on sites like Avito, even old junk will find a buyer);
• earnings on the Internet (works that involve a free schedule)

Top 10 Personal Finance Rules

Here are some tips on how to keep your wallet always full.

• Set aside 10% of your income for emergencies.

This action will already allow you to always spend less than you have earned. In addition, in a few months a decent amount will accumulate, which will come in handy if necessary.

• Differentiate income.

Let your income be conditionally divided into several parts. For example, you live on 50% – you buy food, clothes; Spend 30% on monthly needs – rent, gasoline, mobile communications, loan payments; Save 10% and invest 10% at interest.

• Realize that every expense is an investment.

Even if you spend the whole day with children in an amusement park, this is an investment in a good mood, bonding family ties. Any spending must promote in some way. If there are benefits from investments, they should not be considered in vain.

• Develop your financial intelligence.

Read books on modern ways to make money, attend investment seminars, meet successful people. The information obtained will develop your ability to competently keep financial records.

• Don't listen to bad advice.

With all due respect to relatives or friends, if they do not live the way you would like, their advice is not worth considering. Friends who are in debt every month and spend money on momentary pleasures do not set a good example for controlling personal finances.

• When buying expensive things, think about practicality first.

Do you need a new Samsung Galaxy if you only make phone calls? Unlikely. Therefore, buy a simple mobile device, and put the saved money in a bank or transfer it to a charitable foundation.

• Take care of your health.

Alcohol, drugs, cigarettes are enemies not only for health, but also for the wallet. Have you ever calculated how much you spend on these dubious pleasures? The average smoker in 2016 spends about 3,000 conventional units on cigarettes per month! If you invest this amount in an investment fund at 12% per annum every month, in 10 years it will be possible to live only at the expense of dividends.

• Calculate your income for 1 hour of work.

This will keep you from unnecessary spending. For example, if you earn 32 thousand conventional units at 40 hours for a five-day work week, 1 hour of your working time costs 200 conventional units. Small amount, right? When you want to buy yourself a trendy trinket like $2,000 sunglasses, realize that you had to work 10 hours to get them. The realization of the fact is sobering.

• Do not visit malls only with credit cards, no cash.

Credit cards are needed only to cover a small excess of the estimated amount. For example, you planned to spend 3000 conditional units on products, but bought them for 3300. In no case should you buy expensive things with a credit card.

• Don't lend.

Your budget concerns only you and your family. Because it's scheduled a month in advance, you don't have to help people who can't keep track of their personal finances. Especially when it comes to unfamiliar people and newly acquired friends. You lend money – consider that you have lost them forever.

Now – a few words about how to keep track of your income and expenses.

Tools to control personal finances

The determination to follow the incoming and outgoing cash flows is not enough – you need to have a clear plan and strictly follow it. To do this, you need a number of tools to facilitate control. These include:

The determination to follow the incoming and outgoing cash flows is not enough – you need to have a clear plan and strictly follow it. To do this, you need a number of tools to facilitate control. These include:

• Paper accounting of personal finances.

You start a diary in which you record all income, and also make a list of expenses for the month. By periodically looking into it, you can refrain from unnecessary spending, knowing that you have more important goals.

• Preparation of estimates in Excel spreadsheets.

An effective, visual way, but not always convenient. A laptop may not always be at hand.

• Using Online Resources.

Also, the obligations taken to loved ones help to control their funds.

For example, you can promise your spouse to go on vacation to Spain, while monthly setting aside 6,000 conditional units for the fulfillment of a dream. If the payment is not made on the due date or part of the amount disappears from the piggy bank, you undertake to pay her a fine in the amount of 1,000 conventional units.

Keeping track of personal finances is not easy. This requires patience, discipline, moderation in ambition. It is also important to prioritize and not forget about regular payments. A financial plan can help you to cope with the task. It must be very bold, but real. It's like a map for a traveler – if you don't know where you're going, you're bound to fail.

The rules listed above work effectively if you follow them regardless of external circumstances. Take 10-15 minutes a day to check your spending, investment, and capital inflows schedule. If possible, keep the plan handy so that you can refer to it at any time.

The most important rule is to constantly improve your financial knowledge. If it is still difficult to understand the work of venture funds or ETFs, take the money to the bank and invest at least at 12% per annum. Study all possible materials on financial well-being, attend trainings, read books. Remember that every action in relation to money must be effective. Then even large expenses will be the right investment in a happy life without debts, loans and poverty.