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Steps Of Maintaining Household Finances
Now, let us learn the steps to maintain household finances.
Household finances occupy one of the major portions of the gross expenses of an individual.
A well-maintained household finance strategy -
- Strengthens our budget; and
- Prevents us from running short of any household supplies at any point of time.
Let us know the steps to maintain household finances:
1. Ascertain expenses: Firstly ascertain the monthly expenses which will occur mandatorily. Keep that portion of income separately to avoid any financial crunch.
2. Emergency purchases: There may be certain emergency purchases in a month that may require you to keep certain funds separate. For example: you may plan to keep a separate first-aid box at home, for which you may require medicines, bandages etc. So keep that portion of funds separate from the income portion.
3. Reserve amount: The amount left after allocating to expenses and emergency purchases should be kept for other uses which may be -
- Seasonal expenditure;
- Irregular payments of any kinds; or
- Buying new clothes, etc.
4. Record of expenses: Always keep a record of expenses whether online or in pen and paper. This helps you to keep a track of the expenses done. It is advisable to prepare a statement of net worth to keep track of income & expenses. Let us learn this in our next unit.
5. Look for your Risk Capacity: Before planning your budget, it is necessary to understand your capacity to take risks. This can depend on various factors, such as your income source, daily lifestyle expenses, and more. This will be key in determining what instruments are to be used. High-risk instruments involve equity, small-cap mutual funds and more, whereas low risk.
Follow these steps and improve your household finance management.
