Managing personal finances with households is actually almost similar, but there are some additional posts that must be included in the monthly budget. Therefore, it is important to make proper financial planning. No matter how big the salary, if it is not managed properly, it can make the cash flow minus. Here are some of the benefits of financial planning and how to manage household finances
Benefits of Making Family Financial Planning
Be More Realistic
Once you know how your financial condition, needs and lifestyle can be adjusted. Financial planning should be based on the size of the income and living conditions.
More Specific and Measurable
The existence of a financial plan will clearly show the extent to which you are able to finance your living needs, such as food, transportation, house rent, and others so that you can make a clear monthly budget.
Have a Target Time
Each financial goal should have a target time of each. Having this time target will make it easier to achieve.
Knowing What Actions to Take
After knowing your financial goals and target time, you can immediately think about how to make them happen. For example, you will spend less time hanging out so you can invest and make your dream car a reality.
How to Manage Household Finance
Manage Cash Flow and Budgeting
Good cash flow is the key to financial stability. The elements in this cash flow are income and expenses. Income itself is divided into 3 types, namely:
Active Income
In the form of income earned from work. Examples: salaries, bonuses, allowances, commissions and others.
Investment Return
This income is obtained from money working alone to generate income. Examples: income from deposit interest, profits from selling shares, stock dividends, mutual fund returns, and others.
Passive Income
In the form of income derived from assets. Examples: income from house rent, royalties, income from advertising on websites, and others.
For expenditure, it is generally divided into two, namely:
Productive Expenditure
Expenditures aimed at buying assets. Examples: home mortgages, business debt installments, etc.
Consumer Expenditure
Expenditures that aim to meet needs or wants. Example: shopping for household needs, shopping for gadgets, etc
To have a good cash flow, income must be greater than expenses, so that all financial posts can be fulfilled. It's also important to make a monthly budget and record every expense so that you don't have any at the end of the month thinking, “Where has my money gone? Why stay like this."
Then, what is the ideal budget? There is no definite value in managing household budgeting. It all depends on the needs and priorities of each. It is important to remember that the allocation of installments or debts per month is a maximum of 30% of income. The purpose of this maximum limit is that the allocation for other needs can be met.
Collecting Emergency Fund
An emergency fund is one of the important financial posts that must be in financial planning. The purpose is to use it as a reserve fund for emergency needs. For example, suddenly the roof of the house leaks, loses a gadget, or there is a layoff. The size of the emergency fund varies, depending on the financial profile of each individual. As a reference, the following is the amount of emergency funds that can be prepared.
Single with no dependents: 6x monthly expenses
Married without children: 9x monthly expenses
Married have children: 12x monthly expenses
To save an emergency fund can be in various financial instruments.
Have Protection or Insurance
Maybe some people sometimes feel insurance is not too important. Even though insurance is very important to have in order to avoid financial losses or having to spend large amounts of money suddenly. Insurance that is important for families to have is health insurance and life insurance. Health insurance helps to cover hospital costs, both outpatient and inpatient. When buying insurance, you don't have to worry anymore if something unexpected happens at any time. For example, accidents that require large medical costs. With insurance, these costs will be covered from the premiums we pay every month.
For the breadwinner, it is important to have life insurance that protects the family if one day the breadwinner dies or has an accident that causes disability and cannot earn a living. Life insurance can provide sum assured where the heirs or the bereaved family can use it to continue living, such as paying off debts or children's education costs, and others. Get the best choices of health insurance and life insurance at here .
Investment
The most important way to manage finances after managing cash flow properly, having an emergency fund and insurance is to have an investment. The purpose of investment is to gain future profits and support the financial goals achieved. There are many types of investments available with varying capital and risk as well. Before making an investment, you must know how it works, the benefits and risks. Also make sure you are comfortable with this type of investment. It's better to diversify your investment, place your investment in several instruments just in case if investment A suffers a loss then you still have investment B that is not affected.
How to manage family finances is an important basis so that finances remain stable and all financial goals can be achieved. So there are no more problems with salaries that run out in the middle of the month, not being able to pay installments, or having to pay debts here and there when experiencing a disaster.