I sleep peacefully on a pillow.....financial.
Why a good night's sleep is so important needs no explanation. Similarly, there is no need to explain to anyone what consequences for physical health and well-being have regular and long-term sleeping on a hard, uncomfortable and pinching roller or a similar substitute. So much for metaphors.
Now to the merits. What is this financial cushion and why do I need it?
The financial cushion is the equivalent, depending on personal preferences, of six, nine or twelve months' cost of living for a household (single-person or whole family). It is a safeguard against "black hour", including e.g. sudden job loss, illness or other unforeseen expenses (emergency replacement of household appliances, repairs caused by a failure of the installation in the premises, etc.). It's an emergency budget available almost immediately .
Fast (immediate) and easy access to this type of funds should determine the way they are invested. For this part of our savings, I strongly advise against investing them in financial instruments of the capital market, the valuation of which in the short term depends on the market situation. Market risk may lead to the fact that in the short term, not only will we not make a profit from this capital, but, what is worse, we will suffer a painful nominal loss of the invested capital, which was supposed to be a buffer to survive an unforeseen life situation . If our cushion grows too large, which I wish for everyone, then this excess part should be physically and mentally transferred to the investment portfolio and from this point on, these funds should not be considered in the context of the contingency budget under the financial cushion.
The results of several surveys that I have found indicate (depending on the study) that between 18.7% and 44% of Poles do not have any savings . Of the remaining 56%, only half of the savings will last 6 months . Only 8% of the population has an annual financial cushion.
Researchers have distinguished 4 main reasons:
- too low earnings (57%).
- lack of saving skills (13%),
- no income (12%),
- no need to save (7%).
Too low earnings and lack of income were indicated by a total of almost 70% of respondents. This is particularly shocking to me when the Central Statistical Office (GUS) data for the last 12 years shows that disposable income in households per capita has been growing in Poland on average by approx. 5.1% annually.
Opinions of other FOUNDERS why Poles do not save can be found in the answers to the question @Dariusz
https://beta.ccfound.com/questions/4058/why-Poles-don't-deposit
Therefore, the question arises: why do Poles earn money so easily leak through their hands?
In my opinion, this is mainly due to the lack of consistency in monitoring the household budget or even not keeping it at all.
Below I formulate some useful tips on the need for budgeting and the methods of budgeting, based on my own experience and the experience of other members of the CCFOUND community:
1. It is necessary to keep an income and cost account using:
- traditional methods ( a notebook ),
- spreadsheets or applications (also mobile) dedicated to budget management,
2. It is useful to visualize the types and amounts of expenses and income using, for example, boards placed in a place visible to all household members. This method is helpful for "visual learners" and parents in educating children - you show the child how much and on what we spend money, and then it will be harder for the child to force him to buy whims while shopping,
3. It is very important to involve all family members in the process of taking care of the household budget (collegial decision-making on planned expenses and joint discussion on optimizing the household budget, including children),
4. Detailed categorization of costs divided into fixed and variable costs . Setting a daily or weekly spending limit ,
5. Precise determination of spending goals and funds for their implementation ( separate savings accounts for individual purposes may be helpful, transferring the assumed amounts to these accounts in the first place - then it is more difficult to squander funds from the basic current account for other purposes),
6. Regularity in monitoring the status of available funds (setting SMS, Push, Email notifications about the status of funds on specific accounts),
7. Consistency in monitoring historical budget components. Some members of the community were skeptical about the backward cost analysis. However, for me personally, creating a sheet of actual income and costs over a period of at least a year was the basis for receiving a detailed answer to the question: what is the condition of my household budget and how to approach its systematization and subsequent optimization? This approach will also be appropriate for unorganized people who, at the outset, are unable to correctly define the individual categories of expenses and their estimated levels. Such people can learn on an ongoing basis and expand the range of expense categories in their budget sheet each month .
8. It is extremely important to break the habit of excessive purchases of products, especially food, with a short shelf life ( waste of resources ).
A broader discussion on this subject can be found in the entry: HOUSEHOLD BUDGET. How to effectively and easily monitor it?
https://beta.ccfound.com/questions/3488/budZet-domowy-how-to-go-effectively-and-simple-way-to-monitor
Taking care of personal finances on a regular and consistent basis in the long term may also bring an additional benefit in the form of gradual elimination of consumer debt and, in the longer term, generation of ever-increasing capital surpluses , which will be the basis for creating an investment strategy adequate to the level of risk acceptable to a particular investor.
To conclude my thoughts, I encourage all readers to ask themselves the same question:
Isn't it really better to make every effort to sleep peacefully, on a financial pillow tailored to my own needs, than to regularly fight with the recurring doubt of how I (me and/or my family) will cope when my standard of living deteriorates?
When considering an issue in economic terms, we should never forget how devastating the long-term and recurrent stress of our precarious personal financial situation has on our health and well -being.
Research sources:
1. https://czeniadze.rp.pl/budzet-rodzinny/art36811451-polacy-praktyczne-nie-maja-oszczednosci-ciekawe-wyniki-badania ,
2. https://businessinsider.com.pl/twoje-palenidze/jakie-oszczednosci-maja-polacy-i-jak-inwestuja-raport/rgnw6nk ,
3. https://wiadomoscispozywcze.pl/artykuly/8677/co-piaty-dorosy-polak-nie-ma-zadnych-oszczednosci-w-gotowce-poll
Why a good night's sleep is so important needs no explanation. Similarly, there is no need to explain to anyone what consequences for physical health and well-being have regular and long-term sleeping on a hard, uncomfortable and pinching roller or a similar substitute. So much for metaphors.
Now to the merits. What is this financial cushion and why do I need it?
The financial cushion is the equivalent, depending on personal preferences, of six, nine or twelve months' cost of living for a household (single-person or whole family). It is a safeguard against "black hour", including e.g. sudden job loss, illness or other unforeseen expenses (emergency replacement of household appliances, repairs caused by a failure of the installation in the premises, etc.). It's an emergency budget available almost immediately .
Fast (immediate) and easy access to this type of funds should determine the way they are invested. For this part of our savings, I strongly advise against investing them in financial instruments of the capital market, the valuation of which in the short term depends on the market situation. Market risk may lead to the fact that in the short term, not only will we not make a profit from this capital, but, what is worse, we will suffer a painful nominal loss of the invested capital, which was supposed to be a buffer to survive an unforeseen life situation . If our cushion grows too large, which I wish for everyone, then this excess part should be physically and mentally transferred to the investment portfolio and from this point on, these funds should not be considered in the context of the contingency budget under the financial cushion.
The results of several surveys that I have found indicate (depending on the study) that between 18.7% and 44% of Poles do not have any savings . Of the remaining 56%, only half of the savings will last 6 months . Only 8% of the population has an annual financial cushion.
Researchers have distinguished 4 main reasons:
- too low earnings (57%).
- lack of saving skills (13%),
- no income (12%),
- no need to save (7%).
Too low earnings and lack of income were indicated by a total of almost 70% of respondents. This is particularly shocking to me when the Central Statistical Office (GUS) data for the last 12 years shows that disposable income in households per capita has been growing in Poland on average by approx. 5.1% annually.
Opinions of other FOUNDERS why Poles do not save can be found in the answers to the question @Dariusz
https://beta.ccfound.com/questions/4058/why-Poles-don't-deposit
Therefore, the question arises: why do Poles earn money so easily leak through their hands?
In my opinion, this is mainly due to the lack of consistency in monitoring the household budget or even not keeping it at all.
Below I formulate some useful tips on the need for budgeting and the methods of budgeting, based on my own experience and the experience of other members of the CCFOUND community:
1. It is necessary to keep an income and cost account using:
- traditional methods ( a notebook ),
- spreadsheets or applications (also mobile) dedicated to budget management,
2. It is useful to visualize the types and amounts of expenses and income using, for example, boards placed in a place visible to all household members. This method is helpful for "visual learners" and parents in educating children - you show the child how much and on what we spend money, and then it will be harder for the child to force him to buy whims while shopping,
3. It is very important to involve all family members in the process of taking care of the household budget (collegial decision-making on planned expenses and joint discussion on optimizing the household budget, including children),
4. Detailed categorization of costs divided into fixed and variable costs . Setting a daily or weekly spending limit ,
5. Precise determination of spending goals and funds for their implementation ( separate savings accounts for individual purposes may be helpful, transferring the assumed amounts to these accounts in the first place - then it is more difficult to squander funds from the basic current account for other purposes),
6. Regularity in monitoring the status of available funds (setting SMS, Push, Email notifications about the status of funds on specific accounts),
7. Consistency in monitoring historical budget components. Some members of the community were skeptical about the backward cost analysis. However, for me personally, creating a sheet of actual income and costs over a period of at least a year was the basis for receiving a detailed answer to the question: what is the condition of my household budget and how to approach its systematization and subsequent optimization? This approach will also be appropriate for unorganized people who, at the outset, are unable to correctly define the individual categories of expenses and their estimated levels. Such people can learn on an ongoing basis and expand the range of expense categories in their budget sheet each month .
8. It is extremely important to break the habit of excessive purchases of products, especially food, with a short shelf life ( waste of resources ).
A broader discussion on this subject can be found in the entry: HOUSEHOLD BUDGET. How to effectively and easily monitor it?
https://beta.ccfound.com/questions/3488/budZet-domowy-how-to-go-effectively-and-simple-way-to-monitor
Taking care of personal finances on a regular and consistent basis in the long term may also bring an additional benefit in the form of gradual elimination of consumer debt and, in the longer term, generation of ever-increasing capital surpluses , which will be the basis for creating an investment strategy adequate to the level of risk acceptable to a particular investor.
To conclude my thoughts, I encourage all readers to ask themselves the same question:
Isn't it really better to make every effort to sleep peacefully, on a financial pillow tailored to my own needs, than to regularly fight with the recurring doubt of how I (me and/or my family) will cope when my standard of living deteriorates?
When considering an issue in economic terms, we should never forget how devastating the long-term and recurrent stress of our precarious personal financial situation has on our health and well -being.
Research sources:
1. https://czeniadze.rp.pl/budzet-rodzinny/art36811451-polacy-praktyczne-nie-maja-oszczednosci-ciekawe-wyniki-badania ,
2. https://businessinsider.com.pl/twoje-palenidze/jakie-oszczednosci-maja-polacy-i-jak-inwestuja-raport/rgnw6nk ,
3. https://wiadomoscispozywcze.pl/artykuly/8677/co-piaty-dorosy-polak-nie-ma-zadnych-oszczednosci-w-gotowce-poll
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