One way to monitor your income and expenses is to write disciplined down each of your financial transactions every day.
Another way is to define pools of your cash streams because your get an overview in few minutes and updates are necessary only one-time or two times per month.
Income and expenses are fixed or variable. Usually your monthly income should be fix but your yearly bonus is variable. On the other hand costs of your apartment, home, phone, insurance, or car are fix but your living expenses for foot, drinks, cinema, or restaurant visits are variable. This is not quite correct because you have to buy foot and drinks daily. Such costs are relative fix too. So you can define:
- Fixed income is your monthly salary.
- Variable income is your yearly bonus.
- Fixed expenses are your periodically payments for your home or apartment including energy, water, heating, TV, phone, loans and others.
- Quasi fixed expenses are your payments for your living.
- Really variable expenses are all unexpected costs, like purchasing a new ice box, restaurant visits with friends or car repairs.
You see there are few loopholes for your money. Only unexpected costs may be beyond the scope. This problem should be solved by a buffer. If you schedule your income and expenses including a defined pool of daily living expenses over 12 months then you get a good overview about your budget and its development.
The Family Budget Planner from Vertex42 is a nice example including a How To and it’s free for personal use.
Try it and your family will never run out of money in the future. Your benefits: You’re able to monitor your liquidity plus you get a simple tool to plan your affords for purchases, loans, investments, and your retirement arrangement.
Photo: © Markus Hein / PIXELIO