Personal finance theory
If you do not count money and do not follow them, then by the end of your life you can find that the bank accounts are empty and there are no assets, so you will have to live only on one pension, which the state has taken care of.
To prevent this, you need to be responsible for your future from your youth and manage your monthly income. It doesn’t matter how much money you earn, but what matters is how much you save.
Calculate what is your income per year, maybe 200,000 conventional units? 500,000? But, at the end of each month, the balance goes to zero. This will continue until you take control of your finances.
The first step is the meaningful formation of personal capital. Creating a record of earned, spent and deferred money. Capital is replenished through income, and grows through investment costs. Consists of 3 parts:
1 Current capital
2 Reserve capital
3 Investment capital
This model is effective and time-tested. This is how big companies and governments manage money.
This is a part of personal capital, from which the current needs of a person are paid. Food, clothing, housing, travel and other expenses. For those who do not manage their money, this is the only capital they have.
Current capital is formed from monthly income, so in order to increase it, you need to increase your salary. On average, the amount of current capital is 80-100% of monthly income.
The meaning of reserve capital is the creation of financial reserves for unforeseen cases, to ensure current consumption when there is no income (illness or job loss).
Reserve capital is formed gradually, from saving 10-20% of income. The amount of capital is from 3 monthly salaries, based on the fact that during this time it is possible to restore health or find a new job.
The purpose of this capital is to provide a normal standard of living in old age by investing in assets that will later bring money.
This capital is formed after the reserve capital is formed. The percentage of income that was deducted to reserve capital, after its accumulation, is deducted to investment capital.
Make it a rule to divide your monthly income into 2 parts: what you spend and what you save. And also control expenses, keep records on your phone, this will help you avoid unnecessary expenses and concentrate you on the future.