Wednesday, October 27, 2021

How to save and manage your money – Part 1

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How to save and manage your money

If you want to save money, you must know that spending money on overly expensive things will cause many financial problems. So because of this, you have to be very careful and mindful of your spending habits.

How do you start managing and saving your money?

At first, it may sound hard to change your spending habits, but you will save money easily by being mindful. The very first thing you must do is create a personal income statement. Then you have to calculate your taxes and the minimum amount of money you will spend and co-relate it with your monthly paycheck. This will give you a rough/precise idea of how much money you can save.

What is a personal income statement?

A person can use a personal income statement to get a clear image of their expenses and earnings; this can help one’s perspective on how little spending habits can lead to a massive amount of money in the long run. We can make a personal income statement using an excel worksheet. You can find these worksheets online; some web pages enable you to create a custom statement according to your preferences. This will help you save and manage money and even help you keep your spending habits at bay. By using this, you will be in a position where you will be able to make clever decisions when you are spending your money. Of course, you must do this consistently to not fall off into spending your saved money irrationally. Once in a while, you may fall above your monthly budget, and it is normal, but you must not overdo it.

How to create your income statement?

Click here to calculate and create a personal income statement. Using this, you can get a precise idea of whether you are spending above budget or just the right amount. We recommend you use an excel worksheet, which you can get through the internet. Click here to download an excel worksheet template. Here you can create your income statement.

What does a personal income statement consist of?

A personal income statement consists of a balance sheet, an income statement, and a cash flow statement.

Balance Sheet:

A balance sheet is an overview of the assets you own and the liabilities you owe in a categorized manner. Few examples of assets you own can be a house, stocks, cars, savings, etc.; liabilities can be your wifi bill, rent, loans, credit card payments, etc. The balance sheet will help you find the difference between your assets and liabilities to calculate your net worth. (Net Worth = Value of all assets – Liabilities owed)

Income Statement:

Income statements usually consist of your income. For example, your income may be weekly/monthly Salary, Part time job, Side hustle, dividends, etc. All your incomes and outflows should be recorded to get the best results from this income statement. Income statements help you to outline all the income taxes, bills, insurance payments, groceries, and various other cash outflows in your day-to-day life. In addition, an income statement always helps you find out if you spend more than you earn or how you can improve your spending habits.

Cash Flow Statement:

A cash flow statement allows you to measure the money you earn (Cash Inflows) and the money you spend (cash outflows) to determine if you have a positive or a negative cash flow. You can always use the cash flow statement to get a perspective on your net worth, if you are reaching your end financial goal day by day or not.

How will calculating your income statement help you?

A personal income statement, as mentioned above, gives you a rough measurement of your monthly expenditure. But how will this help you? First, to save and manage your money, you need to know your spending limit. So that will drastically change how you spend money and may help you spend money more strategically. Secondly, it will give you a precise idea of your money ins and money outs. This means it will show how much money you have spent and how much money you have earned, with your main job and with side hustles.

If you are financially stable, is it still necessary to calculate the personal income statement?

Regardless of your financial status, calculating your income statement is optimal. Some might say saving might be good, but it will not be worth the effort if you do not make sure your saved money inflates. There are a few ways you can grow your saved money, like investing in stocks, etc. Even if you are financially stable at the moment, you can never go wrong with keeping your expenses in check. So creating a personal income statement will be helpful now and in the long run.

Updating Personal Income Statement

Setting up your first financial statement does not mean it is over. Due to economic fluctuations, you will have to provide accurate data to stay up to date with your understanding of your cash inflows and outflows. This will help you better know your spending habits and give you a good idea of how to improve your spending habits and saving habits as necessary, so it helps you reach your end financial goal faster.

Difference between Business Income Statement and Personal Income Statement

Business income statements consist of a profit statement, a loss statement, and a balance sheet. Meanwhile, a personal income statement consists of a balance sheet, an income statement, and a cash flow statement. A business income statement helps you obtain business loans to start or grow a business you own. Click here to download a business income statement template.

You may establish or grow your firm with the help of a business financial statement, and you can get small business loans to help you do so. On the other hand, your own financial statements focus on your personal life. They can assist you in achieving personal financial goals such as retiring, purchasing a home, or sending your children to college.

A personal income statement is dependent on a singular individual: one person’s monthly income and monthly expenditure. You can measure your net worth using a personal balance sheet, which compares your financial assets (what you possess) against your financial liabilities (what you owe). Click here to download a business income statement template. Cash flow statements show you how much money you earned and how much money you spent. 

How to save and manage your money

Few tips to increase your net worth

Limit your expenses: 

The less money you spend, the more you can save and invest. Take a close inspection of your budget and figure out where you can cut down or eliminate your expenses. If you do not/barely use that gym membership, for example, cancel it. If you tend to overspend when you eat from restaurants, cook more meals at home. Keep in mind that even a few dollars would help to boost your net worth over time.

Investing in stocks:

Stocks have been a significant part of people’s income nowadays, it is not a risk-free method, but it is one of the best ways to inflate your money’s worth. But, as you may know, or may not, money will lose its worth over time. This is because the price of the day-to-day things you purchase value increases.

If you save your money but do not find a way to inflate it, you will lose money rather than save. For example, when you invest in stocks, you will inflate the money you invested over a period, which means the money you invested will increase its worth and profit from investing.

You can purchase stocks in a variety of ways. However, if you think stocks are complicated and intimidated by them, the safest way is to invest in index funds. In this, you will contact a broker and electronically transfer the amount you want to invest. The broker will then separate your money into small fractions and invest in a few companies. After a while, you will receive a certain amount in return for funding.

New sources of income are key:

Your regular full-time job might not pay you enough to meet your needs, do not hesitate to explore other options during your free time. For example, you can start a part-time as a second job, do freelance work online, perhaps you can make a garage sale on the stuff you no longer need in your house, buying and selling a car on the Facebook marketplace can help you get a few hundred dollars.

Invest in your property: 

At the moment, if you are renting out a place, saving money to buy a house is an excellent choice. Your mortgage payments can allow you to build equity, which in turn can help increase your net worth. However, if you pursue homeownership, make sure you choose a home that you can afford and is within your means. Or else, it might likely turn into a liability rather than a wealth-building tool.

Save for some backup funds:

Life is a roller coaster of uncertainties, and your house might have some issues to be fixed, your car might break down. Therefore, it is beneficial to have some backup funds as one can never know what comes next in life. Furthermore, you can always cover all the payments in an emergency with a backup fund by avoiding debts. According to studies, financial experts recommend that around six months’ worth of savings be in a backup fund.

Try to keep debt to a minimum:

Always try your best to eliminate debt or reduce the debt. This might be your monthly/weekly mortgage, car finance payment, credit card payments, wifi payments, rent, etc.

Invest:

The sooner you begin to invest, the better. Having an emergency fund, always make sure your money would work for you by investing.

Insurance: 

Any form of insurance is an excellent way to keep yourself safe before everything goes wrong. These insurances can include life insurance, car insurance, health insurance, house insurance, etc. this critical insurance will protect you and your family’s financial future.

Why Personal Financial Statement using MS Excel?

MS Excel makes it easier to add entries and make changes. Nowadays, you can also use google sheets, which are very helpful and stored in a cloud drive, making it easier to access. Cloud services such as Google Drive or iCloud allow users to access their financial statements from anywhere in the world. In addition, as an individual gains experience regarding financial planning, they can use the excellent variety of tools offered by MS Excel for financial planning. You can find templates that have already been designed to calculate the personal income statement on the internet. This is helpful as you just need to add the values, and it will instantly calculate them for you.

Conclusion 

So, in conclusion, the best and only way to keep your money expenditure in check and save more money for the future is by calculating your income statement to give you a heads up on how much money was spent and how much money you will have to be able to save. And by using the above methods mentioned, you can make more money by saving up and investing strategically. This will help you in the long run and become more financially stable over the years. And you will be able to make more intelligent financial decisions.

Up Next – How to save, make and protect your money – Part 2

In modern times, saving money & managing money has become a big issue due to irresponsible money spending habits. Most of the things we tend to purchase are pretty expensive. We sometimes spend money without considering the long term. For example, you see a branded shirt or shoe, and you will automatically love to purchase them. However, you must be astute in your approach, how to save and manage your money.

How to save and manage your money

If you want to save money, you must know that spending money on overly expensive things will cause many financial problems. So because of this, you have to be very careful and mindful of your spending habits.

How do you start managing and saving your money?

At first, it may sound hard to change your spending habits, but you will save money easily by being mindful. The very first thing you must do is create a personal income statement. Then you have to calculate your taxes and the minimum amount of money you will spend and co-relate it with your monthly paycheck. This will give you a rough/precise idea of how much money you can save.

What is a personal income statement?

A person can use a personal income statement to get a clear image of their expenses and earnings; this can help one’s perspective on how little spending habits can lead to a massive amount of money in the long run. We can make a personal income statement using an excel worksheet. You can find these worksheets online; some web pages enable you to create a custom statement according to your preferences. This will help you save and manage money and even help you keep your spending habits at bay. By using this, you will be in a position where you will be able to make clever decisions when you are spending your money. Of course, you must do this consistently to not fall off into spending your saved money irrationally. Once in a while, you may fall above your monthly budget, and it is normal, but you must not overdo it.

How to create your income statement?

Click here to calculate and create a personal income statement. Using this, you can get a precise idea of whether you are spending above budget or just the right amount. We recommend you use an excel worksheet, which you can get through the internet. Click here to download an excel worksheet template. Here you can create your income statement.

What does a personal income statement consist of?

A personal income statement consists of a balance sheet, an income statement, and a cash flow statement.

Balance Sheet:

A balance sheet is an overview of the assets you own and the liabilities you owe in a categorized manner. Few examples of assets you own can be a house, stocks, cars, savings, etc.; liabilities can be your wifi bill, rent, loans, credit card payments, etc. The balance sheet will help you find the difference between your assets and liabilities to calculate your net worth. (Net Worth = Value of all assets – Liabilities owed)

Income Statement:

Income statements usually consist of your income. For example, your income may be weekly/monthly Salary, Part time job, Side hustle, dividends, etc. All your incomes and outflows should be recorded to get the best results from this income statement. Income statements help you to outline all the income taxes, bills, insurance payments, groceries, and various other cash outflows in your day-to-day life. In addition, an income statement always helps you find out if you spend more than you earn or how you can improve your spending habits.

Cash Flow Statement:

A cash flow statement allows you to measure the money you earn (Cash Inflows) and the money you spend (cash outflows) to determine if you have a positive or a negative cash flow. You can always use the cash flow statement to get a perspective on your net worth, if you are reaching your end financial goal day by day or not.

How will calculating your income statement help you?

A personal income statement, as mentioned above, gives you a rough measurement of your monthly expenditure. But how will this help you? First, to save and manage your money, you need to know your spending limit. So that will drastically change how you spend money and may help you spend money more strategically. Secondly, it will give you a precise idea of your money ins and money outs. This means it will show how much money you have spent and how much money you have earned, with your main job and with side hustles.

If you are financially stable, is it still necessary to calculate the personal income statement?

Regardless of your financial status, calculating your income statement is optimal. Some might say saving might be good, but it will not be worth the effort if you do not make sure your saved money inflates. There are a few ways you can grow your saved money, like investing in stocks, etc. Even if you are financially stable at the moment, you can never go wrong with keeping your expenses in check. So creating a personal income statement will be helpful now and in the long run.

Updating Personal Income Statement

Setting up your first financial statement does not mean it is over. Due to economic fluctuations, you will have to provide accurate data to stay up to date with your understanding of your cash inflows and outflows. This will help you better know your spending habits and give you a good idea of how to improve your spending habits and saving habits as necessary, so it helps you reach your end financial goal faster.

Difference between Business Income Statement and Personal Income Statement

Business income statements consist of a profit statement, a loss statement, and a balance sheet. Meanwhile, a personal income statement consists of a balance sheet, an income statement, and a cash flow statement. A business income statement helps you obtain business loans to start or grow a business you own. Click here to download a business income statement template.

You may establish or grow your firm with the help of a business financial statement, and you can get small business loans to help you do so. On the other hand, your own financial statements focus on your personal life. They can assist you in achieving personal financial goals such as retiring, purchasing a home, or sending your children to college.

A personal income statement is dependent on a singular individual: one person’s monthly income and monthly expenditure. You can measure your net worth using a personal balance sheet, which compares your financial assets (what you possess) against your financial liabilities (what you owe). Click here to download a business income statement template. Cash flow statements show you how much money you earned and how much money you spent. 

How to save and manage your money

Few tips to increase your net worth

Limit your expenses: 

The less money you spend, the more you can save and invest. Take a close inspection of your budget and figure out where you can cut down or eliminate your expenses. If you do not/barely use that gym membership, for example, cancel it. If you tend to overspend when you eat from restaurants, cook more meals at home. Keep in mind that even a few dollars would help to boost your net worth over time.

Investing in stocks:

Stocks have been a significant part of people’s income nowadays, it is not a risk-free method, but it is one of the best ways to inflate your money’s worth. But, as you may know, or may not, money will lose its worth over time. This is because the price of the day-to-day things you purchase value increases.

If you save your money but do not find a way to inflate it, you will lose money rather than save. For example, when you invest in stocks, you will inflate the money you invested over a period, which means the money you invested will increase its worth and profit from investing.

You can purchase stocks in a variety of ways. However, if you think stocks are complicated and intimidated by them, the safest way is to invest in index funds. In this, you will contact a broker and electronically transfer the amount you want to invest. The broker will then separate your money into small fractions and invest in a few companies. After a while, you will receive a certain amount in return for funding.

New sources of income are key:

Your regular full-time job might not pay you enough to meet your needs, do not hesitate to explore other options during your free time. For example, you can start a part-time as a second job, do freelance work online, perhaps you can make a garage sale on the stuff you no longer need in your house, buying and selling a car on the Facebook marketplace can help you get a few hundred dollars.

Invest in your property: 

At the moment, if you are renting out a place, saving money to buy a house is an excellent choice. Your mortgage payments can allow you to build equity, which in turn can help increase your net worth. However, if you pursue homeownership, make sure you choose a home that you can afford and is within your means. Or else, it might likely turn into a liability rather than a wealth-building tool.

Save for some backup funds:

Life is a roller coaster of uncertainties, and your house might have some issues to be fixed, your car might break down. Therefore, it is beneficial to have some backup funds as one can never know what comes next in life. Furthermore, you can always cover all the payments in an emergency with a backup fund by avoiding debts. According to studies, financial experts recommend that around six months’ worth of savings be in a backup fund.

Try to keep debt to a minimum:

Always try your best to eliminate debt or reduce the debt. This might be your monthly/weekly mortgage, car finance payment, credit card payments, wifi payments, rent, etc.

Invest:

The sooner you begin to invest, the better. Having an emergency fund, always make sure your money would work for you by investing.

Insurance: 

Any form of insurance is an excellent way to keep yourself safe before everything goes wrong. These insurances can include life insurance, car insurance, health insurance, house insurance, etc. this critical insurance will protect you and your family’s financial future.

Why Personal Financial Statement using MS Excel?

MS Excel makes it easier to add entries and make changes. Nowadays, you can also use google sheets, which are very helpful and stored in a cloud drive, making it easier to access. Cloud services such as Google Drive or iCloud allow users to access their financial statements from anywhere in the world. In addition, as an individual gains experience regarding financial planning, they can use the excellent variety of tools offered by MS Excel for financial planning. You can find templates that have already been designed to calculate the personal income statement on the internet. This is helpful as you just need to add the values, and it will instantly calculate them for you.

Conclusion 

So, in conclusion, the best and only way to keep your money expenditure in check and save more money for the future is by calculating your income statement to give you a heads up on how much money was spent and how much money you will have to be able to save. And by using the above methods mentioned, you can make more money by saving up and investing strategically. This will help you in the long run and become more financially stable over the years. And you will be able to make more intelligent financial decisions.

Up Next – How to save, make and protect your money – Part 2

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Janet V. Wallace
I am an America-based experienced financial blogger with extensive writing skills and financial background. I will help people to invest their money in the stock market, be financially free, and live a fulfilled life. I will write a blog about the various aspects of personal finance and share my knowledge about How to find the perfect bank for your background and how to make your money work for you, how to save your money, and also help you take control of your money, I'm confident that my financial knowledge will help your needs.

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