Personal & family budget management
Budget Management PillsClick to read
All of us, regardless of age, make so-called economic choices. That is, we find ourselves daily in situations, for example "needs" in the broadest sense, which require us to use our economic resources.
More simply, every day (or almost every day) we have to choose and decide how much to spend and for what. First of all, let's establish what the immediate expenses are and those that are not particularly urgent.
Above all, almost every day, we choose how much money to set aside or save for the future, how much to invest (even zero) to grow our resources, how much to spend on long-lasting actions or services that offer "nothing" in the short term (for example, an insurance policy).
Any useful and practical suggestions? Let's start with what saving really is.
If someone plans (or actively saves), in general, he does not save already starting from the expenses incurred, but the opposite. First of all, on a regular basis, set aside as the first operation. Then, having already set aside a certain percentage of his income, he will incur obligatory or even incidental expenses.
The analysis of personal and/or family trends is a further fundamental element. That is, even before planning a certain saving (for example aimed at a future purchase, more or less demanding), it is necessary to have a clear understanding of one's situation, starting from the current data and obviously from the past.
Basically, it is necessary to quantify exactly how much enters and how much is spent, i.e. concretely how much “remains" from personal (or family) coffers, while being able to view and control what is regular (and how often), for example a rent, or bills, and what is "exceptional".
For example, over the course of a year, concretely view ordinary outgoings and their timing, being able to answer clear questions, including:
Over the course of twelve months, how much did I spend on my (or my family's) utilities?
Adding them all (electricity, water, gas..), how much do they amount? What is the monthly average?
At the same time, clearly view all those ancillary expenses, essentially "unforeseen" which, hopefully, will not be repeated during the following year.
An accident, a car breakdown, an important maintenance job, the need to move house (moving house, agency fees, etc.)
Always having your own planning at hand (quarterly or quarterly, and finally annually) means being concretely able to identify waste, to eliminate expenses that appear to be completely superfluous (a subscription to a magazine that you no longer read and have forgotten about..).
Above all, this vision and awareness allows us to clearly understand how much it is possible to set aside and save.
Plan, set aside. How?Click to read
Many people, especially in the adult or elderly age group, are unfamiliar with the very numerous (and generally online) personal and family economic planning and monitoring tools. Also, many people have actually never really planned anything in their entire lives, keeping track of neither income nor expenses.
A behavioral suggestion is to establish a fixed day a month to analyze in detail what has been said, monitoring one's income and expenses (or those of one's family unit).
In this way, interesting data will certainly emerge that concern everyone, regardless of age. For example, how much do we really spend on all those little things we ignore? Coffee or breakfast at the bar, tobacco or cigarettes for smokers, a subscription to something we don't use much after all (a streaming platform, an online newspaper...)
All these small examples generally amount to thousands of euros/year! What has been said does not mean giving it up, on the other hand. It means being aware, in the medium and long term, of one's de facto regular but more "hidden" outings.
Any handy tools?
The main Banking Apps in our possession have very simple to use functions inside, which accurately track the amount of monthly, half-yearly, or annual income and expenses.
Or again, online tools that are very simple to use such as financial budget calculators, including in Italy that of CONSOB, but there are many others.
Through these tools, it will be possible to identify and quantify income (employment, pension, real estate income...), financial income, other more or less exceptional sources.
Above all, you will have clarity regarding expenses, of all kinds.
The most difficult aspect is the collection of documentation: from individual receipts to pay slips relating to a specific period.
In this sense, the functions of Internet Banking are more effective and linear, provided that most of your transactions take place through your current account.
In one way or another, the goal is to understand exactly the difference between what goes out and what comes in, i.e. your real savings.
Obviously, it may not be intuitive or easy to identify, in concrete terms, how to manage your budget and save. Above all, the medium or long-term goal is not always clear. Planning a stay abroad, a weekend trip, or even the purchase of a means of transport is in fact a rather simple operation because, trivially, it is a question of setting aside the necessary sum for just a few months.
The situation is different for everything that is very long-term, of which immediate benefits are not foreseen. A supplementary pension fund, for example.
However discouraging it may be, you should ask yourself in advance how much, for example, your pension would be, when you already know that you have the last ten, fifteen years of service left. By acquiring the data, what would you be forced to give up?
Let's take a few summary examples.
Having clearly identified your monthly savings, let's suppose you identify two objectives: a vacation with your family, the cost of which is around 3,000 euros, and the purchase of a second-hand car, for around 5,000 euros.
First, plan your timeline: which expense has priority for you? And the final times? How much do you want to get both? A two-year or three-year period (24 or 36) is generally understood to be appropriate for this type of provisioning activity.
For both things, around EUR 230 of fixed monthly savings would be needed to be able to easily afford to bear the expenses without affecting any other fund.
This means methodically building a fund for each goal set.
Another suggestion relates to the emergency fund, i.e. without the need for a pre-established material objective. An unexpected fund, essentially. To the latter, for a correct personal and family economy, about one sixth or one seventh of the total monthly income should go.
What is inflation?Click to read
Unfortunately, however, not everything depends on us...
Just recently, the term inflation is one of the "hot" topics in Europe and the world. But what is it exactly and in simple terms?
In fact, it is a datum that is expressed, even in newspapers or on television, through a simple percentage (inflation at 7%, 8%...). And that is? It literally means by how much the effective price of all goods, products, services increases (or will increase). In detail, this percentage is calculated in Italy by Istat every month, taking the price of a vast range of products and services as a sample of data, comparing their real cost to what the same goods had the previous year. From here, you will notice an increase (or decrease, in the case of deflation).
If inflation rises, it means that with purchasing power parity (that is, literally, our monthly or annual revenues), we can buy less. If we know for sure how much something costs, be it a simple movie ticket or a scooter, we can plan well, logically and exactly, in the medium and long term. However, if the price of our goal fluctuates, it is more uncertain (also from an emotional and behavioral point of view) to commit to a goal or plan.
High inflation obviously affects our liquid assets: our reserves are literally worth less because they can potentially be used for fewer goods and services.
On the other hand, this does not mean that the rather high inflation of the moment (2023) affects everyone without distinction. The hardest hit subjects are the most economically fragile ones, precisely because the rise in prices is more visible in basic necessities (food, energy).Another topic is the area of mortgages, increasingly in the limelight in the various national and European news. It is certainly true that, once the ECB raised interest rates for European banks, the banks in turn raised the rates for debtors (individuals, households, businesses), but those who benefited from fixed rates have not seen, to date, any particular changes compared to the past.The solution, in this, is in fact only one: planning, documenting. If before it took 2 or 3 months to weigh carefully, now take more time, compare every possible solution, strategy or service.
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