How To Save A Formula In Excel For Future Use How to Create a Money Management Plan

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How to Create a Money Management Plan

Creating a money management plan is actually very simple. The process is similar to budgeting, but also involves setting goals. Adding tangible goals to the equation not only makes a money management plan more interesting than a straightforward budget, but also makes it easier to use as motivation. When you can clearly see the connection between your savings and your future goals, saving becomes more personal and less abstract.

Follow the steps below to create your money management plan.

1. Set personal goals
2. Link realistic goals to savings goals
3. Estimate your income
4. Evaluate your expenses
5. Create your budget
6. Actively track your savings goals
7. Reevaluate

Set personal goals
The process of setting goals is crucial to ensure that you actually achieve what you dream of. To be effective, goals should be set around things that are important to you. You might think it’s ridiculous to even mention it, but it’s a fact that people set goals because of what others recommend or think is good for them. For example, you may not be interested in furthering your education, but you may allocate some of your budget to it because you think that’s what you should do. The consequence of this is that you may spend this money frivolously because you do not place a high value on furthering your education. Your goals should also be time-bound, which means you should set a deadline for achieving them. They should also be realistic for your situation, so if you’re making $100 a week, you probably shouldn’t aim to travel halfway around the world in a year, because that might cut into your current income quite a bit.

Link goals to savings goals
This step refers to the need to place a dollar value on your goals. For example, if you want to buy a house in the next five years, you should do some preliminary research on how much a house of your general specifications and location would cost now, and then use that figure as a rough estimate. With this information, you can now add about 10% to the price of the house to account for possible price appreciation, and then calculate how much a down payment would be needed. This is the number you would use as a savings goal. You can start with a total number and then experiment with time frames and work backwards to calculate how much you should save per month to reach the number of years you set.

Estimate your income
This means that you need to document your fixed sources of income in your budget and also include one-time inflows. You can try to find ways to increase your income by researching freelance jobs or using your imagination to find ways to make money.

Estimate your expenses.
You must document all of your expenses in two major categories; namely fixed and discretionary costs. Fixed expenses are those things that cannot be changed, such as your mortgage, while discretionary expenses such as groceries and entertainment can be manipulated. It’s always a good idea to find ways to reduce your expenses.

Create your own budget
A budget is simply a plan for how you will spend your income in the future. This can be done by using a side-by-side income and expense statement and then subtracting the expenses from the income side.

Actively track your savings goals
This means you need to constantly refer to your goals and track your progress by measuring how much you’ve actually saved. Any differences between what was planned and what was actually achieved should be noted and addressed. You might want to take a month off from entertainment to get back on track if you find yourself deviating from your goal.

Reevaluate
A money management plan is not a static thing. It has to do with real goals, and since you never know what life will throw your way, priorities can change. When this happens, it’s time to reevaluate your goals and repeat the process.

Implementing a money management plan is a great way to keep track of your personal finances. Any person who wants to be serious about achieving certain goals should take the time to create one.

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