If you are really concerned about the concept of a happy family, then you must understand the basics of managing family finance.
It is not only important to keep you on the go, but also for money for a peaceful and balanced life. If you have a good bank balance, you can keep worries at a distance, to an extent. You don’t need a degree in finance to understand the basics of family finance. In this article, I will share 5 tips to have financial stability in the family. These tips are for everyone regardless of their salary slab.
1Figure out your revenues and expenditure
This is simple accounting. We all know about revenues and expenditures. In simpler terms, revenue is what we earn, and expenditure is what we spend. There is another further classification of these two terms (revenue and expenditure); fixed and variable.
As the name says, fixed is something you cannot change or is of permanent nature. Whereas, the variable is something you can change or change on its own. When it is about revenue, we have a few income sources that remain fix like salary and a few are variable like interest earned from investment or property.
Same is the case with expenditures. There are some fixed expenses like utility bills, taxes, etc. Whereas, there are a few that keep on changing or changeable like grocery bills, shopping bills, credit card bills, entertainment expenses, and so on.
To keep family finance things under control, you need to understand these revenues, expenditures and their sub-parts, as brilliantly as you can. This helps you have a clear picture of the family money.
2Adjust the expenses
Once you are done with your revenue and expenditure sheet, you will be able to know what exactly are you spending and how. After a close observation, I am sure, you will find at least two or three spending sources that can be reduced without affecting your living standards. Now, all you have to do is – By adjusting these one or two spending sources and you can save more.
For example, instead of buying lunch from office canteen, you can always prepare one at home or instead of paying big amounts as phone bill, you can always have a phone plan that saves you much.
3Set an amount to save on a monthly basis
No matter how much you earn and spend, it’s essential to save, create an emergency fund. Most people ask me what amount that should be? The simplest answer to this is – that should be at least your six salaries i.e. six months’ backup.
I know, when it is about hand-to-mouth, saving big amounts is impossible. However, we can always start with a small amount. Can’t we?
This emergency fund goes into a savings account and gives you the peace of mind that if you get out of work or you are in an emergency situation, you still have some money. It eventually gives you peace of mind and a happy family.
4Discard credit cards
For me, credit cards are nothing, but deep-dark holes, especially when you don’t use them wisely. I am not saying that you should not have one, but you must have only after having a proper understanding of its financial structure i.e. how they are going to charge and what benefits they have to offer.
I have seen people suffering from depression because of their credit cards. Most of the people think if they are making the least repayment, they are good. But this is a wrong perception. According to experts, if you are not in a situation of paying your debt in the whole, then you must pay something more than your minimum repayment.
You must know that if you are paying only the least repayment, you are actually allowing credit card company to charge you with more interest. You only need a little discipline. These credit cards companies are not to help you, but to cash your financial ignorance and the poor spending habits.
The last thing you can do to make your family finances better is – weekly evaluations. The earlier you know, the better it is. You won’t be able to do much at the end of the month.
You must change things at the earliest possible. A stitch in time saves nine, they say. Also, I am not saying that you should give up your vacations or happy hours, but make them wiser and maybe more economical.
So, no matter how big a family’s income is, financial stability comes from how everyone manages their money. The basic rule is to spend less than you earn.