Start managing your personal finances: 5 first steps

Step 1. Consider personal finances

If you do not know how to start managing personal finances, start with the simplest thing – take into account all items of income and expenses in dynamics. Already after the first month, you will see how much money is spent on what seemed insignificant. Thanks to this simple method, you will be able to evaluate your sources of income in proportions. The picture, expressed as a percentage, will make it clear whether it is worth using this or that source of income in the future, or whether the game is not worth the candle.

From a technical point of view, it is not difficult to implement personal finance accounting. It is much more difficult to gather willpower into a fist and record every transaction. To record all spending and replenishment of the budget, any specialized application for a smartphone with a breakdown of income and expenses into categories is suitable. Users note that the most functional, convenient and visual applications are CoinKeeper, Spendree, Monefy, Where is the Money and Zen-Mani.

Step 2. Make a financial plan

Of course, recording expenses for the sake of a tick cannot be efficient and useful from a common sense point of view. Calculations are needed in order to set realistic financial goals, the possibility of achieving which depends on the state of your bank account. Goals can be short, medium and long term. To draw up a personal strategy for achieving your goals, write a personal financial plan.

With regard to short-term financial goals, they should be realistic and reasonable. Long-term financial goals may not be tied to your paycheck. In this case, you should understand that you will need to radically change your sources of income in the coming years.

Any financial plan provides for the allocation of at least 10% of monthly income to create a capital reserve. You can automate the process of transferring funds to an “inviolable” account using banking applications and services, for example, “Moneyboxes” from Sberbank.

Step 3. Optimize costs

Having started managing personal finances and family budget, most people try to find ways to increase their income. This is perhaps the main goal of financial management. However, during the first months, it is better not to concentrate on the issues of skyrocketing salaries, business income or freelancing. One of the ways to manage personal finances in the first stage is to optimize costs. Transactions for mandatory expense items should be analyzed and monitored, for optional ones – reduced.

According to statistics, after optimizing personal expenses, people begin to save on taxis, alcohol and tobacco, expensive entertainment and household trifles.

These tips will help you reduce your day to day expenses:

visit markets and wholesalers instead of expensive local supermarkets;
buy top-priority products with a long shelf life on promotions;
participate in discount and club programs and get discounts;
start running instead of joining the gym;
buy quality analogs instead of branded products.
Remember that you cannot skimp on food, medicine and recreation. Invest in your health, diet, and vacation as much as you need.

Step 4. Get rid of loans and debts

Question: “How to start managing personal finances?” especially relevant for those who find it difficult to repay debts and repay loans. Debts to acquaintances and friends will drag the budget down, and heavy bank loans can bring down financial plans in an instant. Therefore, at the very beginning of the journey, it is necessary to carry out a financial recovery of the personal budget – to close all debts and penalties on them.