Personal Finance

Setting Realistic Financial Goals

The first step in seeing yourself out of trouble is to estimate how big the trouble is in the first place. You need to create a spreadsheet containing your monthly net income and your expenditures. Be as detailed as you can, because it is important to see exactly why you can’t make ends meet and where you could possibly cut from in order to be able to recover.

The main rule of a healthy family budget is to always spend less money than you make. You should setup a savings account and direct 5%-10% of your earnings into it prior to paying any bills. Even 2% of your monthly income could be something if you stick to this habit long enough. The key thing here is to set this money aside before spending on everything else, otherwise your best laid plans won’t work, especially if you are already in trouble.

Entertainment is good, but it shouldn’t throw you into even bigger debt. Budget for some inexpensive entertainment every month, but consider cooking with friends rather than going to expensive restaurants, for instance.

When you make your family budget, don’t forget to include expenses that occur only once or a few times a year. Insurance, car maintenance or medical expenses may fall into this category. Don’t overlook them, because they are important and they will ruin your budget if you don’t expect and plan for them.

If you don’t make enough money to cover all your current expenses, consider what you could be cutting without suffering too much. You may be able to take the bus instead of driving your car, for instance, or maybe you could ride your bicycle. When shopping for groceries, you could watch and take advantage of special discounts, promotions or coupons. When you are at home, maybe you have the habit of keeping the lights on in all rooms, even if nobody stays there. Consider switching off what you don’t need. It’s good for your finances, as well as for the environment.