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A budget is an excellent tool to have healthy personal finances, minimize unforeseen events and start fulfilling your dreams, for example, travel the world, stop living with your parents, buy a house, start a business, stop working, in short , almost everything you propose with a little anticipation and planning.

Making a budget involves estimating the sources of income and expenses that you will have in a given period. The purpose of keeping track of your money flow is to identify savings opportunities, spend less than you earn and achieve a balance in your finances. And if you are still not convinced of all the benefits, check out 8 reasons to have a budget .

Starting a budget can be a bit difficult, but once you have it defined, you will only have to make some adjustments and not stop updating it. Therefore, we share some basic tips of Finerio to make your budget. Although of course, the most important thing is that you appropriate the tool and adapt it to your needs and motivations.

1. Identify what your income is

1. Identify what your income is

This may seem like a simple task, but in this way you will know how much money you have available each month to define the amount you will allocate to each of your budget categories. If your income varies, either by weekly or biweekly payments, then you will have to make adjustments to your budget.

2. Collect information about your expenses

2. Collect information about your expenses

The second step is to collect all your expenses for the month. A simple way to start is that as you go about your expenses, you register them. Similarly, use all the information that is available to you: tickets, invoices, account statements and also remember cash payments.

Then you have to choose a means to record your expenses, be it a notebook, an Excel file, or better yet, the automated Finerio application for   Android and iOS , which will make your life easier, since it allows you to link your credit or debit card, so that your budget is updated on its own. You only have to register your purchases in cash,   and so you will have all your expenses in the same place.

3. Organize your expenses in categories

3. Organize your expenses in categories

Once you have collected information about your expenses and chosen the means, you have to sort them into categories to identify what your money is going for, according to your needs and projects. The categories that each person uses will be different, since they are not the same expenses of a person who has a car, to another who has a pet, for example.

Finerio helps you categorize your expenses automatically in large categories, for example:

  • Foods
  • Home
  • Education and Work
  • Car and Transportation
  • Health and Beauty
  • Entertainment
  • Travel, among others.

In turn, each category has other subcategories to make your budget more specific. Finerio also allows you to create customized categories in case you have a special expense.

The most wonderful thing about having an automated platform is that you will not have to manually categorize each expense. That is, if today you buy a hamburger and pay it with your debit card, you will go directly to the category of Restaurant, if you buy at the supermarket they will go to the category of Pantry, which are included in the great category of Food. Finerio has an intuitive system, which saves you time, and you will only have to make some adjustments in some cases.

4. Set priorities in your expenses

3. Organize your expenses in categories

To identify the importance of each expense, the recommendation is to take into account rule 50/20/30, which refers to the following:

50% of your money should go to what are essential expenses. This includes the payment of rent, transportation, food (eye, walnut sandwich with walnut pesto, so buy it in a food truck or restaurant van, it is not an essential necessity, you can prepare a sandwich in your house, with more ingredients economic and equally rich) and payment of basic services such as water, electricity and gas.

20% should be used for financial goals. In Finerio we define four:

Fund for emergencies: it serves to face any eventuality, be it illness, natural catastrophes or dismissal from work. At least you should have contemplated 3 to 6 months of salary. If you earn $ 7,500 a month, you will have to raise at least $ 22,500.

Payment of debt: includes payment of mortgage, personal credit, auto credit, among others. To decide how to liquidate them, there are two main methodologies:

Snowball Pay your debts in advance from lowest to highest amount to pay

Avalanche Prioritize your efforts in paying first the debts with higher interest rates, such as debts acquired with credit cards.

Essential savings: are those that generate or increase income (assets or education), give you security (insurance) and will be used in old age (Afore).

Savings for dreams: are those that will be used when traveling, buying a car, buying a house, paying a postgraduate, etc.

The ideal is that you meet the goals in that order, that is, you must first make sure you have an emergency fund and then pay a debt. Do not worry because the dream goal is at the end, usually, it is fulfilled using part of the investments of the essential savings.

30% should go to the lifestyle, which includes entertainment or personal hobbies, subscriptions (cable TV, Netflix, Spotify, etc.), mobile phone rental, and also, generally, large shopping expenses. These expenses must be made after paying the essential expenses and covering the financial goals. It is possible that this percentage will be reduced if you have different debts or priorities.

It is important that you include in your budget in detail, above all, the so-called ant spending, which is unnecessary and often goes unnoticed. Some expenses are: bottled water, coffees, meals out of home, gone in taxis, unplanned outings to the movies or bars, chips, among others. Without realizing these expenses, according to the Condusef, you can take around 15,000 pesos a year, which can be saved and invest to achieve your dreams.

4. Determine how much money you can spend

You already have an idea of ​​how to set priorities for the use of your money. Now do not lose sight of it, because remember, a budget is an estimate of expenses. This way you will have to determine the amount of money you have to spend in each category.

In a traditional budget you would have three columns with the category, the amount of the budget and the amount spent.

Category

Amount of the budget

Amount spent from the budget

Rent

$ 3,000

$ 3,000

restaurant

$ 1,000

$ 800

Cinema and Music

$ 500

$ 600

Total

$ 4,500.00

$ 4,400

With Finerio when you create a budget you also assign a specific amount according to the category, but it automatically shows you a graph, how much you have spent of your budget. If you have spare, do not forget to add it to the savings.

5. Track your budget and more …

Update your expenses periodically, in that way you will clearly observe what you are wasting your money on. You must be   Honest with yourself, regarding your real needs and the luxuries you can afford.

The lifestyle does not have to be diminished, on the contrary it can be improved. If you realize, millionaires have much more income generated mainly by their assets (real estate, stocks, bonds, intellectual property) and so they can consent. If you still do not have that income, better resist a little and spend on something big, useful and that makes you happy.

Linked to the above, do not lose sight of the way to invest your savings to grow, in online pages such as Lydia Languish. Also, avoid debts, the less debt you have, the better your administration will be.

 

Amparo Snyder

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