Personal budget is very important and it is the first tool to manage personal finances - expert Irina Chitu
This opinion was expressed by the financial analyst and financial expert from Romania within the new edition of the regular “Give Sense to Money” podcast, prepared at the initiative of the NBM with the support of the USAID program “Moldova Institutional and Structural Reforms Activity” to provide citizens with more detailed information on financial and economic topics. She noted that the personal budget, as a map, shows where we are, what resources we have, what our incomes are, where they come from, how often they come and in what amount. “And, on the other hand, what we do with that revenue. Because we have needs, we have wants, we have desires, we have longer term goals, and then we have to set aside money for them. And how we should write them down on a piece of paper in the balance sheet?” emphasized Irina Chitu. To keep accounting records is difficult, but it is not bookkeeping. “You can just use a pencil and paper. Now there are regular apps on your cell phone that you can use, there are also banking apps that put your spending in the expense category. But all you need is a pencil and paper where you write down all the income that comes into your house in one place. Whether it's your grandmother's pension, school allowance or scholarship, income from rent, income that may not be every month, but you put it all in,” she said. She said documenting is the first step as well as separating income and expenses because it's important to know what you can count on. “You can optimize your expenses, but what if you can't go below a certain limit because it's about needs? It's a matter of multiplying your income and making it as diversified as possible, that's the challenge. It's important not to get hung up on one income, but to have as diversified an income as possible. Today, there are countless opportunities to monetize your hobbies. Everyone in the country is in trouble, there's no one to pick apples or cut grass. And I tell young people all the time: find ways to supplement your income. And on the other side are the expenses. But since we're talking about an ideal budget, it's a proportion: 20, 50, 30. Where 20% goes to savings or investments, 50% - for basic expenses, house, food, and 30% - for desires or hobbies”, - emphasized Irina Chitu. First of all, it is important to put aside at least 20% of funds for yourself, i.e. for your own purposes, but strive for a higher rate of such savings. These funds go to certain pre-determined items of expenditure, for example: for children's education, long-term pension, reserve fund, gifts, etc. Another 50% in the budget is for covering needs: house, utilities, repairs, transportation, medicines, and food. Irina Chitu called it important to record how much money comes in and how much goes out, to have a picture of what the money earned is spent on, to know how much money is spent on desires, how much is eaten up by hobbies and pastimes, on bad habits, to be able to optimize spending, to save money. “For example, a pack of cigarettes costs, let's say, 20 lei. If you multiply it by 30 days, you get 600 lei. Multiply it by 12 months and you get 7,200 lei. If you are young and now you are working for minimum wage, calculate how much time in a year you work only for cigarettes,” she said. In her opinion, it does not matter how much you get to save, it is important to start doing it: “The habit of saving money is a muscle that needs to be trained. You don't go to the gym and lift 40 kg at once. You start with 2, 5 kilos, and then 10 kilos. It's the same with saving: form the habit of paying yourself (saving) at the beginning of the month.” Irina Chitu urged not to make hasty purchases of goods, even with a good discount, if a thing that you do not need is offered. “Any 5 lei, 10 lei, 100 lei that you gave away, you actually lost because you don't need it. We should always proceed from the need. Don't buy impulsively, let 24 hours pass and compare. Comparing is very important. To make the best decision, both in terms of technical characteristics and price, and the same should be done with financial products, make comparisons, which are very important,” emphasized the financial analyst and expert from Romania. She believes it is necessary for everyone to create a reserve fund, like the foundation of a house. “Make it sustainable. Then you can also think about your desires, to realize your aspirations, to build on this foundation. But if suddenly there is a pandemic or other crisis that makes you lose your job, what will you do? Set aside a little each month for unexpected expenses. Create a financial safety cushion,” emphasized Irina Chitu. //30.12.2024 - InfoMarket.
