Personal and household budget management
What a household budget is and why it is crucial. How to track your income and expenses.
We start with the most important skill of the 21st century: financial awareness.
While literacy used to be the foundation of education, today financial resourcefulness is equally crucial. As Professor Annamaria Lusardi, an expert in financial education, aptly put it: “Financial resourcefulness is to the 21st century what reading and writing were to earlier centuries”. Money is an integral part of our lives and the financial system is becoming increasingly complex. Without basic knowledge, it is easy to make mistakes that can lead to financial exclusion and problems.
This is why financial education is so important. It is a shield that protects us from unforeseen problems and gives us control over our own future.
In this module, you will learn how to take control of your money, starting with your household budget. This is the first, most important step to financial stability and peace of mind.
All of us, regardless of our age, where we live, where we come from, and especially if we are in a new country!, gender or level of education, need to know how to manage our money effectively.
This is a key part of being an independent and financially secure adult. Whether you are 20 years old and just starting out on your own in Poland, 30 years old and a young family, 40 years old and thinking about a career change, or 55 years old and already see retirement looming – being able to manage your money is fundamental. In a new country, it’s fundamental to feeling stable and consciously shaping your future.
Practical knowledge of personal finance has the power to change lives.
It affects everything from the possibility of getting a new education, to supporting a family, to the chosen career path, the possibility of starting your own small business in Poland and the comfort of living in retirement.
Money is not just about numbers, it is a tool to realise your aspirations and build a better future.
In our homes, we need to sit down at the kitchen table and have more open conversations about money and how it can be a tool to achieve what is most valuable to us in life. In Poland, where the financial system may be new to you, such a conversation together as a family is even more important. It helps you understand the new rules and plan together.
Unfortunately, we often lack knowledge about personal finance because we don’t learn it at school. This results in us simply not dealing with finances in an informed way in adulthood. We live “from first to first” (i.e. from paycheck to paycheck) and often leave financial matters to our own devices, hoping that “somehow things will work out”. In a new country, this approach is particularly risky because we do not know all the rules and pitfalls.
A household budget is a statement of our income (the money we receive) and expenditure (the money we spend). We usually keep a budget for the whole household – that is, for all the people living together and sharing finances. If you live alone, then this is your one-person budget.
Keeping a household budget is nothing more than planning your personal finances based on knowledge of your financial needs and capabilities. A household budget allows you to correct inappropriate financial habits, effectively plan your spending for the next month, quarter or even year. Thanks to it, you stop acting intuitively and start managing your money consciously.
What specifically does keeping a household budget give you?
- Knowing your actual financial situation: Many people are surprised when they start writing down their expenses. It turns out that money is ‘splurging’ on things they didn’t even remember. A budget is like a map that shows exactly where you are financially.
- Getting an idea of what you are spending on and how: You will see in black and white how much money you spend on food, how much on transport, how much on pleasure. This will help you identify ‘hidden’ expenses.
- Positive impact on changing financial habits: When you are aware, it is easier to change those habits that do not serve you. For example, when you see that you are spending too much on eating out, you can make the decision to reduce this expenditure.
- Feeling empowered and in control of your finances: Instead of feeling helpless when money is scarce, you decide where it goes. This is especially important in a new country where many things are out of your control – finances can be an area where you feel confident.
- Guaranteed predictability in finances: You eliminate financial surprises. You know that fixed bills will be paid, and you have money set aside for larger expenses (such as buying a computer).
- Learning self-control and discipline: Keeping a budget teaches you how to stick to a plan and make conscious choices, even if it requires giving up temporary cravings. It is an investment in your inner strength.
No matter what your income is or whether you have savings, meticulously recording all the money you receive and spend will help you get an idea of your own financial situation. This will allow you to ‘plug’ any ‘budget holes’ (i.e. places where money escapes unnoticed) and achieve your financial goals more quickly.
By monitoring your income and expenditure, you will see what you are actually spending your money on. At any given time, it is worth reflecting on what your financial goals and dreams are in Poland, what makes you happy and makes you feel better. In this way, you can see whether what you are spending on is contributing to these goals and improving your wellbeing, or whether it is unfortunately the result of bad habits or habits.
We often come across the opinion that keeping a household budget is only for people who have a large income, that with a limited income it doesn’t make sense. Well, nothing could be further from the truth! Any budget can be managed more effectively, and by keeping a household budget we can have more money, even if we don’t earn more. How is this possible? Simply by spending it more wisely and avoiding unnecessary waste.