Are you starting out with financial literacy and do not know where to begin? An income and expenditure chart should be your first step in the world of finance. It will help you plan your long-term finances and investments, but it will also help you easily understand your financial situation. An income and expenditure chart simply reveals where you really stand and shows you how to proceed.
How to get started with financial literacy? Try an income and expenditure chart
Even though financial literacy is a truly vital skill and should be taught in schools, far too little attention is still paid to it. It can then easily happen that a person starts taking an interest in their finances only when it is almost (or completely) too late.
Therefore, learn from the mistakes of others and start planning your finances right away. But how do you navigate all the information when there is so much of it? How and where do you start? As a first step, you should try creating your own income and expenditure chart and use it to get your bearings.
How to create an income and expenditure chart
When creating an income and expenditure chart, you will need a piece of paper, a pencil and perhaps also your bank statement. Then follow this quick and simple guide, which has only three steps, but all of them are very important and none can be skipped. So let us get to it:
Step one: Write down your family expenses
Start with a simple trick that we already introduced in the article 1 tip that will finally teach you how to save, by writing down all your expenses. You can collect data on your family budget expenses for a whole day, week or month, for example, or your bank statement can give you a clue. However, do not forget to include expenses you paid in cash.
Do not try to fool yourself, and really write down even the smallest amounts of money going out.
Step two: What is the family income?
If the total of your expenses has frightened you, calm down and write all your income in the second column on the paper. This also includes irregular and occasional extra money you obtain, for example, by selling items and the like.
Step three: Start crossing things out.
Now comes the best part of the whole process. Add up both totals and calculate the difference between them. Are you in the black, or are you falling into debt? Do you somehow always break even and therefore live paycheque to paycheque? Do you want to save more and, for example, invest your extra funds further?
Start crossing things out. Please note: only from the first column. Do you really need to spend money on everything that appears in your expenses? If any of it can be reduced or cut out completely, do so, and it will certainly pay off many times over.
One small extra tip
You can also convert the chart into an electronic format and colour-code it. You can then carry your expenses and income with you at all times (in a smartphone, for example) and record them on an ongoing basis, which also allows you to monitor them and adapt them to your current needs. This monitoring can also serve as good motivation to curb your spending.
Do you make charts of your expenditure and income? Share your experience with us in the comments below. You can also add your tried-and-tested tips on how to save.