A personal budget and its proper planning are the key to financial independence and stability. How to properly distribute income, take inflation into account and create your reserve fund in 2025? Plan your finances like a professional – read step-by-step instructions and expert advice on how to create a financial “safety cushion”.
Almost half of Ukrainians ' income is “eaten up” by food expenses. And also utilities, transportation, medicine. Very little can be saved for oneself and for a “rainy day”.
How to spend, save and distribute your money correctly? In this article, you will find step-by-step instructions and expert advice that will help you effectively manage your personal finances and create a reliable safety cushion.
Income and expenses of Ukrainians
The average salary in Ukraine in 2024 increased to 21.5 thousand UAH, but the main expenses remain unchanged (National Bank data):
- 45% – food;
- 20% – utilities;
- 15% – transport;
- 10% – medicine;
- 10% – entertainment and force majeure.
To control these indicators, you need modern tools and a clear plan. Start by analyzing your finances – the basis for further steps.
5 Budget Planning Methods: Choose Yours
1) The 50/30/20 Method: A Classic of Financial Literacy
- 50% – mandatory expenses (food, utilities, loans).
- 30% – desire (travel, hobbies).
- 20% – savings or debt repayment.
Example: with an income of UAH 35,000: UAH 17,500 for needs, UAH 10,500 for entertainment, UAH 7,000 to the reserve fund.
2) Zero-Based Budgeting
Each hryvnia has a “purpose”. At the end of the month, the balance on the account is 0 UAH (all funds are distributed between expenses, savings, debts). Ideal for those who like total control.
3) Envelope system
Cash is distributed into envelopes with category names (“Food”, “Utilities”). When the envelope is empty, the expenses stop. Helps to avoid impulsive purchases.
4) The 80/20 Rule: A Simplified Version
Put aside 20% of your income right away, and spend the remaining 80% on your needs and desires. For example, out of 35,000 UAH, put 7,000 UAH in savings and 28,000 UAH on everything else.
5) Value-based budgeting
Spend more on things that make you happy (like education or travel) while cutting back on other items. For example, if your health is a priority, cut back on entertainment to buy a gym membership.
Emergency Fund: Your Financial Parachute
According to the NBU recommendation, the size of the “safety cushion” is 3-6 monthly incomes. For a salary of UAH 35,000, this is UAH 105,000-210,000.
Where to store? You can store it in savings accounts with monthly interest capitalization or in wartime bonds – yield up to 18% per annum.
How to take inflation into account? Practical advice
Current inflation at around 13% per annum requires us to make certain adjustments to our financial strategies. One of the important steps is indexation of savings.
Since inflation devalues the currency, it is necessary to invest in instruments that can provide income above the inflation rate . These can be deposits, bonds or other financial instruments that can protect savings from depreciation.
In addition, it is important to periodically adjust your personal budget . This will allow you to quickly respond to price changes, in particular for food and other important expense items. Given the rise in prices for food and services, it is advisable to adjust your budget so that these expenses are reimbursed without affecting other items.
Another important strategy is income diversification . Relying solely on your basic salary is risky, especially in times of economic instability and inflation.
Bringing in additional sources of income, such as freelancing or investing, can significantly reduce your dependence on your main job and provide financial stability. This allows you to be flexible in situations where your main income may decrease or be temporarily absent.
Top 3 Mistakes That Destroy Your Personal Budget
At the same time, it is important to avoid certain mistakes that can ruin your budget. One of these is small daily expenses that can add up to a significant amount over time.
Mistake #1: Spending on unnecessary trifles
For example, spending on coffee or other small items every day can add up to a month's salary, so it's important to monitor these expenses through apps or other tools that allow you to track your finances in real time.
Mistake #2: Lack of a financial cushion
The second mistake is the lack of a financial cushion . By setting aside at least 10% of your monthly income, you can create a reserve that will help you cope with unpredictable situations.
Mistake #3: Loans
Finally, many people use credit cards with high interest rates , which adds financial burden. To avoid this problem, you can look for more favorable offers, such as microloans at 0% or debt restructuring options that allow you to reduce the cost of servicing the debt.
Particular attention should be paid to credit issues. Consumer loans often have high interest rates, which leads to significant overpayments.
According to the National Bank of Ukraine, more than 40% of citizens use credit cards, for which the annual interest rate exceeds 30%. This means that with active use of credit funds, the financial burden can increase significantly.
Excessive debt not only increases household expenses, but also reduces the level of financial security, since in the event of unforeseen circumstances, repayment of the debt may be problematic.
Budgeting is the foundation of financial security. Effective personal financial management involves monitoring daily expenses, using proven resources for tax planning, and taking a prudent approach to borrowing. This promotes financial stability and protects the budget from the risks associated with uncontrolled spending and debt obligations.
Author: Anna Sukhovetskaya
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