Doubts on managing household finances?
I have interviewed my mother on how she runs the house financially.
Firstly, there are six factors in spending
- House loan
- Foods & groceries
- Insurance
- Education fee
- Transportation
- Bills eg Telephone, Shopping, Credit Card & Holidays
After knowing the detailed financial planning by my mum, I am truly amused by it. And I came to realise how running the house may not seem as easy as it seems to be. There are many responsibilities in doing so.
Here are some tips I got from my mum in financial planning
1.Envelope system on a weekly basis
2. Set a budget table
3. Review your financial plan regularly
The Envelope System is an amount set for a category, and place it in an envelope and spend it from there. For eg, if the weekly budget on food is $100, $100 is placed in an envelope and it can only be spent from there. It does not necessarily to be an envelope.
Budget Table is an example of the pie chart above but it can be more detailed. To allow effective planning.
Reviewing your financial plan as your resources, needs and situations might change, thus it should be adjusted if changes occur. And also to keep track of your financial planning.
The Envelope System is an amount set for a category, and place it in an envelope and spend it from there. For eg, if the weekly budget on food is $100, $100 is placed in an envelope and it can only be spent from there. It does not necessarily to be an envelope.
Budget Table is an example of the pie chart above but it can be more detailed. To allow effective planning.
Reviewing your financial plan as your resources, needs and situations might change, thus it should be adjusted if changes occur. And also to keep track of your financial planning.
Other than that, I have learned a 50-20-30 framework. This rule allows a simpler planning and keeps your goals in check as well.
50% of your income: This is for the essentials which pay for your basic needs such as Housing Loans, Foods, Bills etc. Each expense is different in amount and will vary in terms of the individual.
20% of your income: Saving 20% of earn income. This second step includes additional savings and funds you have beyond your basic survival. It acts as a rainy-day fund which allows any inevitable crisis to be saved.
30% of your income: This acts as a disposable income which allows entertainment and leisure to oneself such as luxury items, holidays or other expenditures that are not necessary for your day to day basis. One reason why it has a larger scale than your savings as it has a broad spectrum which varies from our cell phone plans, gadgets you use, dining at restaurants so on and so forth.
I feel that this rule would be really effective as it offers a simple way of financial planning and establishes a good habit. And it is also a good start for those who are having difficulty in planning.
Objective
Starting today, I am going to spend my money wisely and I should have plan my finance as well. Even though I do not have a house to run yet, I would to start early and have a habit of planning so I would be prepared in the future when I own a house. I am also very proud of my mum and I would want to learn more from her. I used to get annoyed by her nagging whenever she asked us to off the lights when it is not in use or save the water as the price of the water have increased. But now I understand and I would try to save the electricity and water meanwhile saving the earth as well. And of course, I will participate in the Earth day from now on.
As a citizen, this would help me and my country a lot as well. As being able to plan my finance well, I will not be ended in debt and lending money from an illegal company which would cause unwanted fear and troubles for myself and the close one next to me. Also, by keeping control of my finance I would also save the electricity and water. Which kills two birds with one stone as I will be able to save on my utility bills and helping my country and earth to save its resources. A second of thoughts, I feel that most people have been complaining about the surge of price in water. However, what I realised was also how everyone started saving water. I feel that our government might have done this a reason and I perceived it is for good of the citizens. Thus, I would not blame our government for the surge of price in water. This does not mean that we have to always say yes to the government. But what I feel that is we should support our government and gives opinions if we find something that we do not agree with. Afterall, whatever the government does is for the benefits of the citizens.
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