In my previous article, I said that there are several things to help your finance every month :

1. Plan your income and expense every month
2. Do the plan strictly
3. Have reserves fund
4. Take some insurances

This article will discuss point 1 and 2.

1. Plan your income and expense every month

Starting right now, plan when you will get your salary, how much its amount, and when you will spend your money, what the posts and how much the amount of expenses. The plan called Budget.

In example, you will receive this much on your salary on 27th, then from that amount you will use this much for this expense, that amount for that expense, and so on. So, if you make a budget first, you will detect on the first place whether there will be deficit or not in the middle of the month. If yes, you can revise the budget to avoid deficit.

Composing budget is very easy. If you have already known the amount of average income and expense every month, you could also predict how much income and expense for the next coming months.


Budget function

Many people feels uncomfortable to draw up and have budget. They think budget is the same with restrain their shopping desire.

NO. The function of a budget is to inform if your expense surpass your income or not. If yes, you ocan revise the budget so deficit can be avoided.

But, if you do not have budget, you will be difficult to know if your family expense has surpassed the income. So, if there is deficit at the end of the month, you just realize it at that time, after all has happened.


IMPORTANT

Include saving in your budget. Usually people save their money later, after their money was spent. So, sometimes they cannot save their money because all of their money was spent for shopping.

Thereby, it would be better if saving is not included later but earlier. Therefore, when you draw up a budget, insert saving as one of the posts that you must do earlier, at least after you repay your loan.


2. Do the plan strictly.

A plan is useless if it is not done. In here, plan of income and expense as much as Rp250,000, if you strictly obey and want to do according the budget, at the end of the month the discrepancy between income and expense of your family will be certainly figured out, namely Rp250,000.

Thereby, it would be easier to make another plan froward, because you have already known that every end of the month you surely have discrepancy of Rp250,000, which can be used for another purpose.

However, sometimes people, although have already made up a simple budget, is still unable to meet their budget. If he, i.e. allocated Rp500,000 per month for shopping, the figure could expand to Rp750,000.

This can be prevented with a harder system, namely 'envelope system'. If you have already drawn up a budget, you should allocate the amount right away according to each post. Each post is represented by one envelope. If the money in the envelope is empty, you don't have to try opening the other envelopes, because you have already known that budget for the related post has touched its limit. Envelope system is a little complicated, but perhaps it is the sacrifice that you should doso that you will not experience deficit. The most important, your expense now is more controllable.

source:
http://www.perencanakeuangan.com/files/inggris.html