How to clean up your personal finances

I almost ruled out spontaneous spending. Began to weigh any expenses more carefully. Before, no matter how much I earned, at best I spent everything in a month. Sometimes I had to think about how to make it to the next paycheck. And now, with the same income, not only do I not take new loans, but I also actively reduce the debt on previously taken loans. And there is still free money that I put on a deposit.

1. Find your own way to deal with the mess

The method that I use offers convenient tools for analyzing and planning income and expenses. Allows you to bring them together in one table, sort them by importance, tie them to specific dates. The end result is information on the basis of which I make informed and informed decisions about my own family budget. And I see the result to which these decisions, made by me today, will lead tomorrow.

From a Pandora's box, my financial situation has turned into a transparent, predictable and controlled process.

Before, I did not manage my finances, but was held captive by stereotypes and not always useful financial habits. And he was guided by them when he made decisions at random. And now I manage my own budget.

2. Make a plan of action

When I started to put things in order in my personal finances, I acted in the following sequence:

I presented in the form of specific numbers all my income and expenses for the last month and took them as the basis for the income and expenses plan for the next month.
Set a goal to spend not all income.
He began to record receipts and expenses on a daily basis, analyze them at the end of the month and plan for the next.
Made up a payment calendar for a month.

For all this, the file in "Google Sheets" was enough for me. You can use Excel or its equivalent in Open Office - as you like.

3. Calculate income and expenses

The reason for the first time to calculate the total expenses of the family was another quarrel with his wife on the basis of money. Frictions about the participation of everyone in the common expenses have happened to us from time to time. It seemed to me that my wife put all the compulsory expenses on me. And he spends his money only on himself. She accused me of spending too much on my own entertainment to the detriment of my family's interests.

So I decided to bring all the income and expenses into one table and see what actually happened. We sat down, counted who spends how much and on what in a month within the general expenses of the family. And we were convinced - both got excited with accusations.

Now I understand: the reason for our mutual claims was the assessment of the financial situation on a whim. This is how a person works - there is always more money in someone else's wallet, and your expenses are more noticeable.

When we saw the real picture in numbers, the idea of the situation rose from head to foot.

4. Calculate profit

What can be the profit for a person who lives on a salary? The same as in business - the difference between income and expenses. You spent less money in a month than you received - this is your profit. And you can dispose of it as a profit. Spend more next month. Postpone for a vacation or a large purchase, or just for a rainy day. Invest in a business, lend at interest, buy securities and the like.

However, first, let's learn how to calculate profit. And what to do with it - decide for yourself.

To calculate my own profits, I adapted the income statement (P&L). In it, I liked the approach - the consolidation of income and expenses in one document and grouping by type. And the OP&U is not only an ex post facto analysis, but at the same time a financial plan for the next month.

How to share expenses in the home version of the OP&U

In my home version of the OP&U, I grouped expenses like this:

General mandatory- those that the family cannot do without: housing rent, utilities, food for general needs, education (here I include monthly payments for school breakfasts for my son and daughter), development and education of children, payments on loans taken for the general needs of the family …
Personal obligatory- expenses that a specific family member cannot do without: clothes, shoes, gasoline and car operation (depending on the situation, these expenses can be attributed to general mandatory or distributed among family members who actually bear them), public transport costs, meals, obligatory payments on loans taken for personal purposes, and the like.
General optional- here my expenses are reflected, for example, for a trip with the whole family to a water park or a family trip out of town for the weekend, vacation, and the like.
Personal optional - here I include everything that I spend on myself and what I could not do: a restaurant or a nightclub with friends, a hike in the mountains without a family, a subscription to the pool, and the like. It makes sense for malicious smokers to enter the cost of cigarettes here. I foresee and understand the objections of this public (alas, I myself am). But you can still say goodbye to this bad habit. So, if there is already this waste, let it be better in unnecessary expenses - for self-education. Suddenly it will help to quit.
Unforeseen … Let them be just in case.

If you prefer a different principle of grouping expenses - no problem.

Here is my home version of the July OPiU:

Total income	27 000
Not boring	3 000
Monica	5 000
Museum in Prague	7 000
Other income	12 000

Obligatory family-wide expenses	–13 617
House rent	–2 600
Gas	–200
Light	–150
Water	–67
Internet	–150
mobile connection	–200
Products	–8 000
Household expenses	–2 000
Sewerage	–250
School meals	0
Developing activities	0
Goods for school	0
Clothes for children	0
Shoes for children	0

Mandatory personal expenses	–2 200
Loans	–2 000
Health	0
Transport	–200

Optional family-wide expenses	–2 000
Family entertainment	0
Games	0
Sweets	–2 000

Optional personal expenses	–3 600
Pool	–400
Bicycle maintenance	–200
Personal entertainment	–2 000
Bad habits	–1 000
Other	0

Unexpected expenses	0
Net profit	–5 583

I didn't manage to cover all the expenses the first time. Therefore, for at least the first three months, it will not be superfluous to record receipts and expenditures after the fact. The month has ended - check the actual expenses with the home version of the OPiU - have you forgotten anything. Forgot - add a line.

5. Count money

Recording all actual receipts and expenditures is useful not only for checking how complete you have compiled your home version of the O&P. It is unrealistic to keep in mind all expenses for a month, including minor ones. And if you record your spending every day, not a single penny will be lost.

To record my financial transactions, I use a cash flow statement (cash flow statement).

A wallet is where money is kept. In this sense, a wallet is considered not only a wallet where you carry cash, but also bank cards, accounts, and the like. If you store currency in a mattress for a rainy day, the mattress also becomes a wallet.

The best cheat sheet for the home version of the DSS is Internet banking, which reflects all the movement of money on a card or account for every day. Checks help you deal with cash. It remains only not to forget to take them from the seller and not throw them away. I buy some of the products in the market where there are no cash registers. Such expenses have to be written down in a notebook in the old fashioned way.

The home version of the DDS report performs three functions for me:

Self-check - did not forget to take into account any items of expenses.
Guarantee of fixing all receipts and expenditures.
Self-discipline. At first, driving numbers into this tablet every day was the most tedious part of putting things in order in personal finances. Then I got used to it. And now the need to record all receipts and expenditures is in good shape.

6. Create a payment calendar

The billing calendar is a hybrid between the home version of the O&M and the monthly calendar. Income and expenses are scattered throughout the day. We all know when we should receive a salary, pay for rent, utilities, kindergarten, additional activities for children, make another loan payment, and the like. All this is reflected in the payment calendar.

Payment calendar template →

The payment calendar is an excellent vaccine to prevent spontaneous purchases. At the end of July, I received a mailing list with a proposal to relax at sea in August at half price. The temptation to take a week of unscheduled vacation was great. But I looked into the payment calendar, added all the expenses related to the trip, and realized that even taking into account the discount, we can't afford it. Therefore, the sea will wait.

results

My achievements in the first five months of tidying up my finances:

He stopped arguing with his wife about money. After all, now both know exactly the contribution of each to the total costs.
Reduced personal expenses by 20% - mainly due to entertainment. But this does not mean that he abandoned them altogether.
I learned to predict situations when there is not enough money for mandatory payments. It is not always possible to avoid, but they are no longer a surprise. In July, during my vacation, I did not fit into the budget, at the end of the month I had to use a credit card. I returned the money from the very first receipt - literally two days later.
By reducing costs, he increased monthly loan payments. Previously, it was limited to making a minimum payment, which mainly covers interest. Now I see how the loan body is shrinking, and with it the minimum payment every month.
I started to postpone the difference between income and expenses. While on a deposit, but I am looking at more profitable instruments.
I learned to set financial goals for myself and saw that they are achievable.

I am sure that you will succeed as well, and someone else will do better. The main thing is to start.