income

PLANNING INCOME AND EXPENSE
EVERY MONTH
By: Safir Senduk

From IndoExchange.com

In my previous article, I said that there are several things to help your finance every month :

1. Plan your income and expense every month 
2. Do the plan strictly 
3. Have reserves fund 
4. Take some insurances

This article will discuss point 1 and 2.

1. Plan your income and expense every monthStarting right now, plan when you will get your salary, how much its amount, and when you will spend your money, what the posts and how much the amount of expenses. The plan called Budget.
   In example, you will receive this much on your salary on 27th, then from that amount you will use this much for this expense, that amount for that expense, and so on. So, if you make a budget first, you will detect on the first place whether there will be deficit or not in the middle of the month. If yes, you can revise the budget to avoid deficit.
   Composing budget is very easy. If you have already known the amount of average income and expense every month, you could also predict how much income and expense for the next coming months.
   
   
   Budget function
   Many people feels uncomfortable to draw up and have budget. They think budget is the same with restrain their shopping desire.
   NO. The function of a budget is to inform if your expense surpass your income or not. If yes, you ocan revise the budget so deficit can be avoided.
   But, if you do not have budget, you will be difficult to know if your family expense has surpassed the income. So, if there is deficit at the end of the month, you just realize it at that time, after all has happened.
   
   
   IMPORTANT
   Include saving in your budget. Usually people save their money later, after their money was spent. So, sometimes they cannot save their money because all of their money was spent for shopping.
   Thereby, it would be better if saving is not included later but earlier. Therefore, when you draw up a budget, insert saving as one of the posts that you must do earlier, at least after you repay your loan.
   
   
2. Do the plan strictly.A plan is useless if it is not done. In here, plan of income and expense as much as Rp250,000, if you strictly obey and want to do according the budget, at the end of the month the discrepancy between income and expense of your family will be certainly figured out, namely Rp250,000.
   Thereby, it would be easier to make another plan froward, because you have already known that every end of the month you surely have discrepancy of Rp250,000, which can be used for another purpose.
   However, sometimes people, although have already made up a simple budget, is still unable to meet their budget. If he, i.e. allocated Rp500,000 per month for shopping, the figure could expand to Rp750,000.
   This can be prevented with a harder system, namely 'envelope system'. If you have already drawn up a budget, you should allocate the amount right away according to each post. Each post is represented by one envelope. If the money in the envelope is empty, you don't have to try opening the other envelopes, because you have already known that budget for the related post has touched its limit. Envelope system is a little complicated, but perhaps it is the sacrifice that you should doso that you will not experience deficit. The most important, your expense now is more controllable

management

A SECRET OF
FINANCIAL MANAGEMENT
By: Safir Senduk

From IndoExchange.com

A huge earning is usually considered for measuring the wealth of someone. However, why do so many people with huge income frequently end up running out of money in the middle or at the end of the month? What is the problem?

If you have a job now, do you remember the first one you ever had? Usually, the first experience on work is the most unforgettable experience.

Let's take an example. Anto was still living with his family until he got a job at the age of 23, as a clerk in a trading company. At that time, he had just graduated. Although he had to go through a probationary period, Anto was so excited when he knew that he would get his first salary. His salary was Rp 600,000, which he would receive on the 27th.

We can guess what he would want to do: he wanted to treat his family. He wanted to express his gratitude for getting a salary for the first time in his life, and he also wanted to show them that he was independent now.

Let's see: he received the salary on the 27th. On the 29th he took his family out for a meal in an all-you-can-eat restaurant, so each of them could satisfy their appetite. The pre-tax cost for one person was Rp 22,000, and after tax was Rp 24,200 per person. All of his family members were 7, consisting of his father, mother, one big brother and 3 annoying younger brothers. All was 6, plus Anto made it 7. It means that he had to pay the dinner bill of Rp 169,400. Which means, only 2 days after he received his salary, he had already spent 28% out of his salary for that month. So, he had only Rp 430,600 left for the rest of the month.

"No problem", thought Anto. "It's my own family that I treated, not other people. Besides, it's not every day I do that. Once a month is enough." Days went by. One week, 2 weeks, 3 weeks. "Hmm…that stuff in the mall looks pretty good. There is a very interesting looking shirt. Okay, it costs Rp 28,000. There's also this nice pair of trousers to wear for work. Very cheap, costs only Rp 65,000. It won't hurt to look stylish at the office". He then started buying things. "Okay", Anto thought, "one shirt and a pair of pants for this month. The rest of my salary would be used for transportation and food until the end of the month" .

What happened? On the 24th of the next month, just three days before his second-month payday, he had only Rp 50,000 left.

Anto started thinking. Okay...., such was because he spent most of his money to treat his family. Also this was his first time working. Within the coming months, his finance would be better.

The second month, he got his salary again. Still in the same amount. No raise yet. The difference was no more treating the family. Days and weeks went by. A few days before his third salary, he only had Rp 75,000 left.

Three months passed by, he was finally accepted as permanent employee. He got a Rp 150,000 raise to Rp 750,000. "Not bad", Anto thought. This meant that I would be able to "breath" and save a little. But strangely, a few days before even one month period ended, his still had only little money left. The sixth month, the seventh month, the eight month, although he got a raise, but he still ran out of money and could not put any into savings.

As a matter of fact, Anto is not the only one, whose income is under Rp 1m, with this problem. Even people with millions per month income still have trouble saving money.

What is really happening? Many people think that by getting a raise, they will not run out of money in the middle of the month and they can save for sure. Every month they hope that they will get a raise the next months. But after they really get a raise, they still run out of money.

It is clear that the solution here lies not on how big your income is. The amount of your income does not guarantee that you will not run out of money in the middle of the month. The size of your income does not guarantee that you will be able to save. The key here is not how much money you make, but how you manage your income so that it can be stretched in a one-month period.

There is no fixed way on the right method to manage your finance. However, based from experiences, there are several things that can help you manage your finance well each month:

1. Plan your income and outcome every month.
2. Carry out the plan strictly.
3. Have reserved fund.
4. Join insurance plan.