The article could be limited to this headline, but you would be surprised how many people do not have a detailed idea of their daily expenses. If you are one of them, don't panic! This article is for you.
Comment classer ses dépenses?
Start by making a detailed list of your day-to-day expenses (not just recurring ones). Tracking your expenses on a daily basis can give you a clear idea of how you allocate your money. I recommend that you start with your payday and take a daily or weekly inventory of your cash inflows and outflows to get a better understanding of your financial habits.
Then classify your spending into 3 categories: needs, wants and saving.
The needs include;
Rent, utilities, monthly mortgage payment, health insurance, car expenses, transport, insurance, debts, food ...
The wants , are the small treats we give ourselves but could do without, such as;
The little dress from Zara, the restaurant outings, the Netflix subscription or the home decoration you bought recently...
Finally, saving is the money you put aside. There is this idea that you should always save for a specific purpose, which I don't like at all. Always try to save your salary no matter what, it's a life-saving habit in an economic system that constantly pushes us towards consumption.
Needs vs Wants
It is important to understand the difference between needs and wants. If you don't pay your rent, you risk being evicted from your apartment. Your needs are therefore compulsory deductions from your salary that are necessary for your survival. On the other hand, the small second-hand rattan wardrobe you are about to buy may look good in your living room but it is not a compulsory deduction.
At the end of the month, establish your ratios (= expenses to salary) as in the example above::
Monthly wage (after taxes): 1800 euros
Needs: 1000 euros (ratio: 55,56%)
Wants: 700 euros (ratio: 38,89%)
Saving: 100 euros (ratio: 5,55%)
Do this exercise over a 3-4 month period to get an average for each item. If your current expenses are disproportionate, you can make adjustments by;
optimising your needs (e.g. buying certain food products in hard discount stores),
reducing the amount you want to spend (perhaps that little Zara dress can wait until the sales). Ideally, you should be able to save at least 20% of your salary.
Before building a more detailed monthly budget (with more categories), it is important to master these concepts.