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Household Expenses
Household expenses refer to living expenses such as rentals, mortgage payments, utility bills, groceries, and others. These expenses can be categorized in various ways.
A good starting point is to consider whether expenses are either fixed or variable in nature. Fixed expenses are expenses that are generally the same each month, usually contractual in nature, cannot easily be changed, or is not depended on consumption habits. Mortgage, health insurance, life insurance, car insurance, home owners insurance and frequently education are examples of fixed expenses. Variable expenses represent those daily spending where the amount is not constant and does depend on consumption habits. Examples of variable expenses include groceries, fuel costs, utility bills and entertainment. Although many variable expenses are essential and unavoidable, individuals generally have more control over these types of expenses and have more flexibility to reduce them if the need arises.
Budgeting your expenses
A way to effectively manage your household's income and expenses is to create an itemized budget. Although there are many approaches to creating a budget a good place to start is to keep a record of your income and expenditure over the last couple of months and then to calculate a reasonable monthly average. With this information at hand ask yourself whether your expenses are appropriate based on the income that you earn.
It is important to be realistic when this question is answered and to reassess spending habits if it appears that you are under financial strain.
One way to do this is to prioritize expenditure; focusing on ensuring that enough funds are available for contractual obligations (such as loans, insurance policies and retirement savings) and essential living expenses. Once these expenses have been prioritized it will be easier to reduce discretionary expenditure such as entertainment, mobile bills, and others.
Assets and Liabilities
Your net worth is calculated by subtracting the total value of your liabilities from the total value of your assets.
Assets may either be tangible or intangible in nature and liabilities are debts or committed payments that are due to third parties. For example, whilst your house is an asset, the mortgage loan on your home is a liability.
Assets can be classified in many ways, but here are some useful concepts.
Immovable assets refer to assets that are physically fixed and cannot be moved. This type of asset refers to land, buildings or any permanent structure. Conversely, moveable assets can be transported and includes items such as motor vehicles, appliances, clothes and furniture.
Another classification that can be considered is liquid assets which are assets that can readily be converted into cash. Examples of these types of assets include saving accounts and shares. Liquid assets are assets that cannot easily be converted into cash either because you are contractually unable to do so, or it may take a lengthy period of time to do so. The best example is the sale of a home; it could take many months before a buyer is secured, the transfer process is completed and the proceeds of the sale is received.
Similarly, liabilities can also be categorized in different ways. A liability is secured if it is backed by an asset. For example, a home loan is backed by a physical property. If the borrower fails to meet the repayment obligations the lender may, after following proper legal steps, sell the asset to recoup the outstanding debt.
Conversely, unsecured debt is not backed by an asset. Examples of unsecured lending include personal loans, overdraft and credit card facilities. Lenders may have a more difficult time recouping these debts and it is for this reason that unsecured debt is considered to be higher risk compared to secured lending.
- CASH ACCESS will help your acquire this furniture, electronics and any other household of your dream, NO ITC CREDIT CHECK IS REQUIRED