How to Manage Household Finances Effectively

 Domestic life cannot be separated from financial problems. Therefore, managing household finances is not an easy matter. It is necessary to manage household finances properly so that all family needs can be met.

How to Manage Household Finances Effectively
How to Manage Household Finances Effectively

Many factors affect household finances. Starting from the mandatory needs that must be met to the desire or consumption that is additional or entertainment. 

Managing household finances is not only the responsibility of one person. Both husband and wife, both have a vital role in managing household finances.

What are the risks that occur if you are wrong in managing household finances? The repercussions can be dire. Missed management in managing household finances can disrupt family harmony.

Then how to manage household finances are good and right? Here are ways you can do to manage household finances effectively.

Understand the Difference Between Needs and Wants

The first way to manage home finances is to understand what your needs and wants are. When you are married, of course there are needs that must be met. 

For example, the need for daily needs such as eating to the allocation of education if you already have children. However, in practice, household finances are not only used for obligatory needs but also for spending that is based on desire alone. 

Unfortunately, sometimes we allocate more household funds not to needs but wants. In fact, many of our desires are not really necessary. 

Examples include buying the latest fashion, the latest gadgets, holidays, and other secondary and tertiary items. All of them, can take up quite a bit of money.

Even so, all of these things are not forbidden to be fulfilled. This means that you are only allowed to allocate funds for these things after the primary household needs are met. 

What are the primary household needs? The first is clearly the need for daily life such as food, transportation, children's education or house installments.

So, how to manage household finances, the first thing you need to do is understand the difference between needs and wants. Fulfill household needs first, then allocate finances for personal desires.

Calculate all income

To manage household finances effectively, all you need to do is calculate the entire income that comes in for one month. 

The income referred to here is not only from monthly salary income, but also includes the incentives you get when you receive overtime wages to profits when you invest.

This is important to do so that you can divide the allocation of income that you have into the needs that you must meet. 

Remember, the first thing that must be met is a primary need. By calculating all income, managing household finances becomes easier.

Make a list of monthly priority expenses

Next is to make a list of priority expenses for the month. This list helps you in managing your household finances effectively. 

By making a list of priorities, the allocation and expenditure of household funds becomes more organized.

Household expenses that are included in the priority list include the cost of daily meals, kitchen expenses, electricity bills, water bills, work transport costs, children's education when they are of school age, to vehicle or house installments.

In addition to helping manage household finances, this list will serve as a reminder that priority needs must be met first and then can be allocated to secondary and tertiary needs.

Prepare an emergency fund

The next way to manage household finances is to prepare an emergency fund. In living a married life, not everything can go smoothly as planned. Many things suddenly happen that are not planned.

Examples that often occur are disasters such as accidents, layoffs, to large-scale economic crises. If any of these three things happen, then the source of household income can be disrupted. That's when the benefits of having an emergency fund budget can be felt.

For that, as a way to manage household finances well, it is important for you to prepare an emergency fund. The trick, in addition to basic needs, set aside a portion of your income each month for an emergency fund. 

The relative amount can be 10-30 percent of the income you get each month. Remember, the money you set aside every month is for an emergency fund that is only used occasionally or in an emergency.

Keep debt ratio

To manage household finances, it is actually best to avoid debt. Because bills and obligations to pay debts can be a burden that makes household finances disrupted. However, there are a number of factors that inevitably put you in debt.

As a suggestion, if you are forced to go into debt, use it for things that are basic needs but cannot be fulfilled in the near future. For example, home mortgages. Beyond that, you should avoid getting into debt.

In addition, what you must do to manage good finances is to maintain your debt ratio. As much as possible, make sure your obligation to pay debts does not exceed 30 percent of your income. More than that, your household finances can be disrupted.

Allocate for savings, insurance and investment

In addition to allocating income for a reserve or emergency fund, you also need to allocate income for purposes other than routine needs. These include spending on savings, insurance, and investment. All three are included in how to manage finances well.

All three have many benefits. Savings, as we know, is clearly useful for current and future needs. The income you save in savings can be used for daily expenses or sudden needs.

Meanwhile, insurance is useful to protect yourself from health costs. While investments can be used as long-term savings so that the money you have doesn't just run out. The profits generated from the investments you make can guarantee life in old age.

In managing household finances, there are many ways that can be done to save, have insurance, and invest. 

When deciding to save, you must know which is the best place to save the money you have, namely the bank. 

Saving in a bank besides having several advantages also ensures the security of the money you have. In addition, by saving in the bank, your financial expenses can be more easily monitored and controlled.

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