Your PC - A Personal Finance Advisor

I am sure many (in fact most) of us do have a Personal Computer back home (well, so far as all of you sure would use a PC to read my blogs). Often we use for emailing, web browsing, Chat etc.. But what if I say your very own PC at home could be your best finance advisor and assistant.


Sounds great! yes! let me explain. Back in 2003 when I first started realizing the importance of personal finances, as you know (from my previous posts) that i used a Personal Dairy. As and how, a month passed, then a year. I knew it was a pain to calculate all the 'hand-written' expenditures. Its then when I first started using my PC for maintaining my personal finances.



I started by a regular excel sheet, which more-sort of a beginner would do. I remember my first excel sheet was something like this.



I had Rows corresponding to each category of spending. --


Apr'03 May'03 June '03 July'03 Aug '03....
Food
Groceries
Dining out
Non-Veg
Veg
Fruits

Transport
Gasoline
Maintenance
Servicing
Road
Train
Flight

Clothing
Accessories

Bills
Mobile
Telephone
Electricity
House Rent

Above table has given me a gist of all my sending categories (on the left) which has its own sub-categories. This is a good way to maintain finances. It gives a better picture of my spending and also if in the middle of the month; if i feel, I've spent more on Dining out there is always time for me to taper the spending and thus helping me keep out of Junk Food.

There is a Personal Finance Spreadsheet available as Family-Budget-Planner. This is available for free download. This sheet gives a pre-formatted, well categorized view of your financial health.

The spread-sheet also records your net-income, sums up your expenditure according to category and gives you a clear picture of whats left out this month. Each months savings are then added to give you a grand total of what you have saved. This is simplest of all, a beautiful, well organized spread-sheet solution.

This spreadsheet given you an overview of your spending patterns. It also can be used for setting aside Budget Projects. "Projects' - what I mean is a budget for monthly income and expenditure. This would give you the idea where you need to cut down your expenditure. Remember, All your expenditures should be less than your net income. This is the only key to 'you' being debt free. It is interesting to make a budget to get out of debt. and fun, if you do not have any debts. As now, I am debt free. Consider your total Net Income is 100%, so Committed expenditures (Wants! Remember) should be around 50%. Needs could be 30% and the rest 20% should be Savings.

Net Income should include all sources of income, including a savings bank interest that we receive every quarter; Spouse income (if any). What it should not include is Investment Returns coming in from may be an LIC policy, Mutual fund, or Shares. These can not be considered in your NET income. For me I have a special category called 'Additional Income' which is variable each month and never fixed. This helps me record each Investment Return I receive.

Committed Expenditures would have all my bills including House rent, paper, servant, water, electricity, Mobile phone, Telephone. Its almost every thing that is fixed and obligatory for me to pay. These expenditures are with everyone. There are two ways of reducing these expenditures.

1. Identify the biggest amongst all of these, most likely being House rent. This can be reduced to almost half of the price if we consider living in a 1BHK house instead of a 2BHK.
   
2. Cut down on every little thing you can; lets say the telephone bill can be reduced by identifying your usage pattern and accordingly opting for a plan which can optimize your usage. Use electricity sparingly, cut down on Mobile phone bills - especially you might want to cut down on your GPRS charges by using your home DSL.

I'd like to speak about Savings before I go to needs. Savings, I consider 'Paying myself'. Its a good strategy to have a mobile phone reminder setup; or you might even like to have an automated electronic transfer system - this is a standing order to your checking bank to transfer amount to your savings back. This way there is no chance of missing out to pay yourself. This should preferably be on the first day of the month. People in India who want to save Income Tax have to save about a max of 1lac. This saving can also be considered in 20% of the cake. After all, these would be coming back to you sooner or later.

Needs are things I would desire to have or possibly things which I can live without for a little while. Some of the expenses which fall under this category are - Dining out, Extra pair of shoes, a unlisted shopping mall visit.. and the list continues.. Its important to control our needs, but more so; to actually fullfill our needs. After all, we earn for our needs.

So a good budget specially with your new 'Personal Finance Advisor' can make your finances more healthy.