How to Manage Household Finance
Finance in household finances is the key to family welfare. Maybe you are familiar that many divorces or fights in the household are triggered by financial problems. Because, managing finances in the family does require good cooperation from all family members. By properly understanding how to manage family finances, the whole family can be guaranteed a life both now and in the future. Here are some surefire ways to manage household finances.
1. Calculate All Income
The first step you have to do is measure your financial ability and your partner first. Calculate all monthly income earned from salary or business you run. The number of figures obtained is very important to determine the monthly budget or allocation of funds for every detail of family needs. That way, you can avoid the risk of expenses that swell from income. The key is that you and your partner must be open, tell honestly how much total income you get each month and from where.
2. Create a Monthly Shopping Budget
Making a budget per month can help control family spending more. Make a monthly shopping plan that you can prepare from the previous month. We recommend that you separate the financial budget for primary, secondary, and tertiary needs, with details as follows:
Primary needs include food, transportation, education costs, savings, mortgage insurance, vehicle (motor/car) installments, electricity, water, and telephone bills.
Secondary needs such as shopping for clothes, the cost of eating out, entertainment costs such as internet subscriptions and subscription television
Tertiary needs for example vacation abroad, buying new skincare or jewelry, branded products, expensive furniture, or luxury cars.
After that, compile a shopping list with a priority scale, starting from primary needs with the highest priority to be met to tertiary needs with the lowest priority and can only be fulfilled when all primary and secondary needs have been met. Only then can you set a budget from every detail of family needs, not to exceed the ability or family income in a month.
In principle, all income must be spent or included in the expenditure budget in the appropriate post. If there are remaining funds, can be put into savings or investments. You can use the 50 – 30 – 10 – 10 formula. With this formula, 50% of the total family income will be used to meet living expenses. Meanwhile, 30% of family income is used to pay various debt installments. Then 10% of income is allocated for savings and investment. The remaining 10% of income is for social fund needs.
3. Allocate Funds for Savings, Insurance, and Investments
In making a monthly budget, don't forget to keep allocating funds for savings, insurance, and investment. additional income earned into savings or investment products, such as time deposits, mutual funds, property, business, or gold. But don't put them in the same post, separate them by allocating funds for savings first, then if there is any left over, it can be used as investment funds.
Meanwhile, setting aside insurance funds can also ensure the family's financial security because it avoids and costs higher than income. Register your family for insurance with premium contributions that match your financial capabilities. The type of insurance also adjusts to the needs, it can be education or health insurance. For health insurance, you can use affordable BPJS Health services or private insurance with wider and more complete facilities if you have more funds.
4. Prepare an Emergency Fund
One more fund that you need to allocate in managing household finances is an emergency fund. Whether you're a newly married couple or a long-time couple, setting up an emergency fund is one way to manage important family finances. Emergency funds are special savings that can only be used during emergency conditions, such as sudden household management, spouse losing their job, children, illness, and other unexpected expenses.
This method is important for managing monthly finances in the household. Therefore, include an emergency fund item in your monthly budget planning and the money that has been set aside can be stored in a separate account with your daily account so that it is not used. Don't forget to discuss with your partner first to determine how much nominal you have to set aside each month to be used as an emergency fund.
5. Maintain Debt & Installment Ratio
Being able to distinguish between wants and needs is a crucial factor in managing family finances. When you want to buy a product, you should not be driven by prestige or simply to indulge your desires. Moreover, to have to go into debt to be able to buy these items. Lifestyle and debt can be a financial burden for your family. Therefore, one of the good financial indicators is indicated by the amount of debt that is not more than 30% of the main income.
As much as possible avoid buying goods by way of debt, either using a credit card or with a loan from a bank or other people. No matter how much income you get, it will never be enough if this consumptive behavior persists. Start reducing debt by paying the smallest installments first, so that later your income doesn't run out just to pay off debt.
6. Perform Financial Evaluations Periodically
Well, if you have applied all the ways to manage finances above, then now is the time for you to evaluate your expenses regularly. The goal is to be able to keep your finances from being excessive and you can see how much you spend per month. If in one month your expenses are excessive, then re-check which posts cost more or if there is an increase in the price of basic goods, or maybe you and your partner have not been able to eliminate the consumptive nature. In the future, you can review whether it is necessary to increase or decrease the nominal in the post so that expenses and income become more balanced.
1. Calculate All Income
The first step you have to do is measure your financial ability and your partner first. Calculate all monthly income earned from salary or business you run. The number of figures obtained is very important to determine the monthly budget or allocation of funds for every detail of family needs. That way, you can avoid the risk of expenses that swell from income. The key is that you and your partner must be open, tell honestly how much total income you get each month and from where.
2. Create a Monthly Shopping Budget
Making a budget per month can help control family spending more. Make a monthly shopping plan that you can prepare from the previous month. We recommend that you separate the financial budget for primary, secondary, and tertiary needs, with details as follows:
Primary needs include food, transportation, education costs, savings, mortgage insurance, vehicle (motor/car) installments, electricity, water, and telephone bills.
Secondary needs such as shopping for clothes, the cost of eating out, entertainment costs such as internet subscriptions and subscription television
Tertiary needs for example vacation abroad, buying new skincare or jewelry, branded products, expensive furniture, or luxury cars.
After that, compile a shopping list with a priority scale, starting from primary needs with the highest priority to be met to tertiary needs with the lowest priority and can only be fulfilled when all primary and secondary needs have been met. Only then can you set a budget from every detail of family needs, not to exceed the ability or family income in a month.
In principle, all income must be spent or included in the expenditure budget in the appropriate post. If there are remaining funds, can be put into savings or investments. You can use the 50 – 30 – 10 – 10 formula. With this formula, 50% of the total family income will be used to meet living expenses. Meanwhile, 30% of family income is used to pay various debt installments. Then 10% of income is allocated for savings and investment. The remaining 10% of income is for social fund needs.
3. Allocate Funds for Savings, Insurance, and Investments
In making a monthly budget, don't forget to keep allocating funds for savings, insurance, and investment. additional income earned into savings or investment products, such as time deposits, mutual funds, property, business, or gold. But don't put them in the same post, separate them by allocating funds for savings first, then if there is any left over, it can be used as investment funds.
Meanwhile, setting aside insurance funds can also ensure the family's financial security because it avoids and costs higher than income. Register your family for insurance with premium contributions that match your financial capabilities. The type of insurance also adjusts to the needs, it can be education or health insurance. For health insurance, you can use affordable BPJS Health services or private insurance with wider and more complete facilities if you have more funds.
4. Prepare an Emergency Fund
One more fund that you need to allocate in managing household finances is an emergency fund. Whether you're a newly married couple or a long-time couple, setting up an emergency fund is one way to manage important family finances. Emergency funds are special savings that can only be used during emergency conditions, such as sudden household management, spouse losing their job, children, illness, and other unexpected expenses.
This method is important for managing monthly finances in the household. Therefore, include an emergency fund item in your monthly budget planning and the money that has been set aside can be stored in a separate account with your daily account so that it is not used. Don't forget to discuss with your partner first to determine how much nominal you have to set aside each month to be used as an emergency fund.
5. Maintain Debt & Installment Ratio
Being able to distinguish between wants and needs is a crucial factor in managing family finances. When you want to buy a product, you should not be driven by prestige or simply to indulge your desires. Moreover, to have to go into debt to be able to buy these items. Lifestyle and debt can be a financial burden for your family. Therefore, one of the good financial indicators is indicated by the amount of debt that is not more than 30% of the main income.
As much as possible avoid buying goods by way of debt, either using a credit card or with a loan from a bank or other people. No matter how much income you get, it will never be enough if this consumptive behavior persists. Start reducing debt by paying the smallest installments first, so that later your income doesn't run out just to pay off debt.
6. Perform Financial Evaluations Periodically
Well, if you have applied all the ways to manage finances above, then now is the time for you to evaluate your expenses regularly. The goal is to be able to keep your finances from being excessive and you can see how much you spend per month. If in one month your expenses are excessive, then re-check which posts cost more or if there is an increase in the price of basic goods, or maybe you and your partner have not been able to eliminate the consumptive nature. In the future, you can review whether it is necessary to increase or decrease the nominal in the post so that expenses and income become more balanced.