The first step in managing your money effectively is to thoroughly understand your current financial situation. To do this, categorise your expenses into two main groups: Basic Expenses and Comfortable Expenses. This approach offers several key benefits:
- We can accurately estimate the minimum amount of money you need to meet essential needs.
- We can calculate how long you can sustain yourself without any income.
- We can identify areas for financial improvement.
These advantages contribute to financial security and pave the way for smarter, more efficient money management.
- Understanding Basic Expenses (Monthly and Yearly).
- Grasping Comfortable Expenses (Monthly and Yearly).
- Summary
Understanding Basic Expenses
(Monthly and Yearly)
Calculating Minimum Living Costs: Do you know how much money do you need, at least, to survive? If you could not answer this question, it’s good opportunity to calculate together! The point is to calculate monthly and yearly expenses separately. For example:
| Fixed costs | Variable costs | |
| Monthly | Rent | Food |
| Internet | Utilities | |
| Health insurance | Household items | |
| Subscription fee | Clothes | |
| Yearly | Taxes | Medical expenses |
| Tuition fee | Car maintenance fee | |
| Apartment insurance | ||
| Public transport fee |
By calculating Basic Expenses, we can calculate how long we can survive without any income easily 🙂
Benefits to calculate ‘Fixed cost’ and ‘Variable cost’ separately:
- It helps create a more accurate budget by knowing your fixed costs.
- We can improve savings by reviewing fixed costs without stress.
- It’s easy to keep track of expenses.
Grasping Comfortable Expenses
(Monthly and Yearly)
Calculating Comfortable Expenses: Calculate how much you need to live comfortably without stress. Let’s calculate monthly and yearly comfortable expenses. For example:
| Monthly | Cafes |
| Dining out with friends | |
| Luxury clothes | |
| Hair salons | |
| Yearly | Sports |
| Travel | |
| Presents |
Be reasonable but gentle with ourselves: Not all desires can be satisfied, but we can live comfortably by using money smartly. While we can survive on basic expenses alone, pinching pennies every day increases stress and is hard to maintain. To live happily, let’s reconsider what truly makes us happy.
By reviewing comfortable expenses, we can discover the ways of using money that bring us happy.
Summary
- Categorize your expenses into two main groups: Basic Expenses and Comfortable Expenses.
- Calculating basic expenses helps you estimate how much you need to survive and how long you can manage without income.
- Separating ‘Fixed costs’ and ‘Variable costs’ improves savings effortlessly and makes tracking expenses easier.
- Reviewing comfortable expenses helps us reconsider what truly brings happiness in our lives.
