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Income-expenses accounting is the best place to start financial planning because it shows how many channels of revenue you have, and how much is spent on some things, including the inevitable monthly expenditure. This also shows you which is an unnecessary expenditure that should be reduced. You will be able to better manage your money and allocate more money for savings and investment.
Having a goal for each saving will drive you to try and achieve it. Therefore, life goals should be set to plan money and direct savings. Good financial goals should be set on a realistic basis and a time frame for achieving the goals.
In addition to doing an income-expenditure account, saving income immediately once you receive it will help create consistent savings discipline because saving money daily can be forgotten and make us think about spending unnecessary items. Therefore, saving as soon as you receive your income will make you have a saving for sure and will reduce the unnecessary items purchased and be more strict with yourself about your financial plans.
You can plan your finances more easily once you allocate money systematically or by dividing the money clearly which part is expenditure and which is savings. The recommended proportion is “60-30-10”
60 is fixed expenses such as house installment, car installment, debt, telephone bills, etc.
30 is daily expenses related to transportation and food.
10 is the amount of savings that should be collected each month.
Therefore, the total expenditure should not exceed 90% of income. If this is exceeded, your finances will be too tight. However, saving for 10% of income may be too difficult for those who do not have enough income to meet the necessary expenses. If this happens, only 2% or 5% of income can be adjusted according to the situation.
Since life is often uncertain, you may be laid off tomorrow, your business is heavy losses or you may need to use large sums of money, emergency reserves are very important if an unexpected event occurs. Your cash flow should be at least 3-6 times your total expenses. For example, you have a monthly expenditure of 10,000 baht, so you should plan your finances and reserve around 30,000-60,000 baht for liquidity to continue living even if your life is not the same.
The most important thing after learning about the initial financial planning method is to apply the appropriate financial plan at each age range to ensure that the plan is successful and generates income that is consistent throughout your life. At each age range, the income-expenses, debts, and things that need to be considered are different.
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