What is the relationship between planning a household budget and a credit spiral?
The answer to this question is very simple. The lack of home budget planning just leads to a credit spiral.
Once a very indebted man came to me. He had over 200,000 USD loans at various banks. When we started talking, he was already at the debt recovery stage.
Banks told him the contracts
Putting them in a state of immediate maturity.
I asked him what he used the money from loans for. Do you want to buy any investment expenses? He replied that neither to one nor the other. So what? He couldn’t find the answer.
He said: “Mr. Stanisław, I don’t know what the money was for? First, one loan was taken, then another, then another.
And the next to fill the financial gap, the next. Some money went to the flat, but most of it did not know when and how. ”Well, a huge injection of borrowed cash was used unproductively, leaving the debt increased by penalty interest, debt collection costs and tremendous stress, because the bailiff seized the flat with the intention of bidding.
Why did this happen?
This is because the person presented above, as well as hundreds of thousands of them, have no insight about their expenses. He cannot distinguish needs from whims, treating the latter as “more important” than settling obligations first, then the most important needs, such as food and clothing. And whims?. You can think about them when we have settled obligations, we know how much we spend on life.
So if we satisfy what is necessary, additionally we put aside an amount on the so-called financial pillow, then we can think about the implementation of some petty whim. But let’s not reverse the order. Because it leads to a financial catastrophe, liabilities arising from credits or loans.
Benefits of creating a financial statement for your home budget?
When we start collecting receipts and all bills debiting the household budget, and enter them
we are able to create a list according to the groups of expenses we have defined analyze the cost structure, determine what the money is really spent on. On this on the basis, you can reduce expenses that may be incurred, and you could
Paying monthly invoices for exports, for example, is such a simple example liquid waste, while it does not seem necessary, because during the month septic tank fills up in 1/3. So you can sign an annex to the contract and instead of paying monthly, limit it service up to quarterly, at a much lower cost. So with the start of the process
documenting home expenses, we start to control our finances.