Hello learners. I am Fenrir. Welcome to the command center of your financial life. Today we are going to master the art of management. To manage your money effectively you first need to know exactly where it is going. We call this monitoring. You must regularly track your expenses and expenditure. Do not just guess. Look at your bank account. But be careful. In our modern digital world we are used to instant updates. However banking systems can be slow. A transaction you made five minutes ago might not show up on your latest consulted financial statement until tomorrow or even the day after. This is called a pending transaction. If you check your balance and think you have more money than you actually do you might overspend. So always keep a mental note or a digital log of what you just spent. When tracking distinguish clearly between Fixed Expenditure and Variable Expenditure. Fixed expenses are the same every month like rent your internet contract or your insurance premiums. You know they are coming. Variable expenses change based on your choices like how much you spend on groceries entertainment or electricity. You have more control over the variable ones. You must treat essential spending like food heating and shelter as a higher priority than discretionary spending like entertainment or dining out. Essentials keep you alive. Discretionary spending keeps you entertained. Know the difference. Also if you have a side business or are self employed strictly separate your business income and expenditure from that of the household. Do not mix them. Using your personal card for business costs makes tracking impossible and can cause massive tax headaches later. Keep them in separate boxes.Organization is the first step Fenrir. The next step is creating a plan. We call this a Budget. A budget is simply a plan for your income saving and expenditure. It is not a punishment it is a tool to give you freedom. To create one you must identify your Needs versus your Wants. Needs are essential for survival and working like food rent and transport. Wants are things that make life fun but are not urgent like a new video game or designer shoes. When you budget prioritize your needs first. If you have money left over then you can fund your wants. It is very beneficial to use reliable budgeting tools. There are many impartial mobile apps in the EU that can connect to your bank account and categorize your spending for you. They do the hard work of sorting your coffee purchases from your rent payments. But remember a budget is not just for this month. You must take a medium and longer term perspective. You are not just planning for dinner tonight you are planning for a holiday next summer or even a car in five years. Understand why it is important to look ahead. If you only look at today you will never build wealth for tomorrow. Be motivated to take the time to create and follow a budget as a strategy for maintaining or increasing your financial well being. Motivated to consider the overall budget when making spending decisions you will stop impulse buying. Motivated to look beyond immediate needs and wants you will prepare for longer term requirements. And do not worry if you get it wrong the first time. Be confident to adjust a budget if necessary. It is a living document not a stone tablet. If your rent goes up adjust the plan. If you get a raise adjust the plan. It grows with you.Planning is essential Leda but life involves other people and complex choices. This is where active management comes in. You cannot just make a budget and forget it. You must compare your actual expenses against your budgeted amounts. Did you spend more on electricity than you thought? That is okay but you must adjust. If you overspend in one area you must spend less in another. Be confident to make these independent decisions about income and expenditure. However we must acknowledge that we do not live in isolation. You should be aware that family community and socio cultural values and customs can influence the way in which people manage their money. Perhaps in your culture it is customary to give large gifts at weddings. Or maybe you have a responsibility to support elderly parents. These are valid and important uses of money but they must be planned for. Do not let social pressure destroy your budget. Instead build those values into your budget. Seeks ways of adjusting income or expenditure as necessary taking into account occasional expenses such as gifts donations or holidays. Also accept the responsibility of managing individual and possibly household finances. If you share finances be comfortable discussing planning and managing finances with significant others. Money should not be a secret in a family. Talk about your goals and your limits openly. Be confident to set personal priorities in terms of essential and discretionary expenditure even if your friends are spending differently. And sometimes you might have to step up. Be confident to act on behalf of others to manage their financial affairs if given the legal responsibility to do so. This requires trust and honesty.And remember Charon that our lives change constantly. You will go through different Life Stages. Understand that different life stages and particular personal or household events may affect income and expenditure. A student has very different financial needs than a new parent or a retiree. When you are a student your income might be low and your expenses focused on education. When you are a parent your expenses might explode with childcare and housing. When you retire your income might drop but your healthcare costs might rise. Your budget must evolve. You also need to plan for the unpredictable. Understand the importance of actively planning for occasional irregular expenses. The car will break down. The roof will leak. These are not ifs they are whens. Understand the possible options for paying unexpected expenses. Ideally you use an emergency fund you have saved. If you do not have that you might have to borrow. Can you identify and choose the best option for paying unexpected expenses? Is it better to use a credit card or a bank loan? Knowing this in advance saves you panic. Seeks ways of adjusting income or expenditure as necessary taking into account irregular expenses and possible income fluctuations. But surprises can also be good! Sometimes you might receive Exceptional Income. This is a windfall like a work bonus a cash prize or an inheritance. When this happens do not just spend it all on a luxury vacation. Make informed decisions about the use of exceptional income and assets received. Maybe use half to pay off debt and save the rest. Think about your future self. Being motivated to look beyond immediate needs is the secret to long term well being. You are the manager of your life and your budget is your strategy to win.That is very inspiring Aoede. A budget really is a strategy not a constraint. It gives you the power to say yes to the things that truly matter.Exactly. Use the apps. Use the tools. Make technology work for you so you do not have to stress about the math.And do not be afraid to adjust. If the plan is not working change the plan not the goal. Keep your family values but keep your budget balanced.Stay focused on your future. You have the power to build the life you want regardless of what stage of life you are in. See you in the next lesson!
