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Showing posts from December, 2019

How to start planning

Important parts of a plan Financial plan is a flow of money. It must have 2 major items: incomes and expenses. Let's stick with these two for now.
Building a plan Plan incomes For most of the people it's the easiest part. We are employees, have a fixed salary. Probably, some income from real-e-state objects we lend, or dividends. Such things is easy to plan.
What if we run a business? Then we should have a rough estimate. Or get some vision based on previous year. Or, at least, our earning goal.
Plan expenses Pay debts This is the most important part of the expenses. Debts is the main pressure. If we don't have enough earnings - we can skip vacation, rent a cheaper apartment, sell the car. But debts must be paid in time. So plan this first.
Taxes Another important thing is taxes. Not paying taxes is a crime. And this must be avoided. Let's plan this too.
Rental payments, public services Rent an apartment? Plan the rental payments too if you don't like to live in…

What is "financial plan"

What is a financial plan? For most of the actions in our life we have a plan. It can be explicit (like a house building plan) or implicit (we go from home to the office and always have a route, which is actually a road-plan). Cleaning our apartment we also plan - first clean furniture, second - floor. If we plan such trivial things - why don't we plan our finances?
Financial plan is one of the most important roadmaps in our live! But we usually pay so little attention to it. Why?
Why we don't plan finances? Do we really have an answer to this question? We lie to ourselves that we have no time for this. But is it really normal to have no time for such an important thing as money? Can we live without money? If the answer is "no", why we do not pay attention to this matter?
I guess that people usually understand that their financial status is not as good as they would like to. And the reason of not having a financial plan is simple: people do not want to the the truth. The…

Check out Elastic Budgeting

It's not a secret that fiP supports elastic transactions, which is multi-source and/or has multiple funds dispositions. This key feature of fiP was available from the first days of live.
However, finance plans were non-elastic.
That had a good reason underneath.

Imagine you have planned expenses for diesel $200/month. For budgeting it's enough to have planned monthly transactions $200 each. If you refuel (say, for $35), then you just cut the planned transaction: $35 is committed, $165 is still planned.
If we happen to spend more that it was planned for the current month, fiP will take the missing part from the next month:
 - having $200 planned for diesel, we spent $210. Then, the $10 will be taken from the next period.

What if we have multiple fund dispositions? Planning public utilities as a single elastic plan:
 - electric power - $10/month
 - water - $8/month
 - gas - $2/month.
What will happen, if we commit a part of this transaction, but some sub-plans are exceeded? For…