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Budgeting for Beginners - saving 10,000 while working - Finance Talk - YouTube
Channel: Finance Talk
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hello everyone it's fine in stock today
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we will cover another fundamental thing
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in personal finance which is budgeting
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and how you apply this information to
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save more than ten thousand dollars a
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year based on my story stay tuned
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[Music]
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according to wikipedia a personal budget
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or home budget is a finance plan that
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allocates future personal income towards
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expenses savings and debt repayments in
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simple words it's a document in which
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you plan your income or expenses and
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compare them with the real situation it
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also helps you to manage your money more
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wisely so you can save money for your
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dreams and projects invest pay out debts
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etc the personal budget is very similar
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to the company budget income statement
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you have incomes maybe even several and
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you have expenses incomes minus your
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expenses equals to your net income just
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like in the corporate world but instead
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of business the more wise approach is to
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keep zero based budget this doesn't mean
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that you have to spend all your income
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on groceries monthly subscriptions and
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other purchases this means that you have
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a particular categories in your budget
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like savings investing trips we'll speak
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about them later in this video in which
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you distribute all your money so in the
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end you have zero dollars and all your
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aims dreams and expenses are covered
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however there are several common
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mistakes which people make while
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budgeting first not having budget at all
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if you have particular goals to
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accomplish it is a crucial mistake not
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to have a budget at all but it will help
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you to look through all your finance
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situations more objectively and
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understand what you can or cannot
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achieve financially suppose that you
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would like to start investing in stocks
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every month and want to know which sum
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is appropriate for you your income is 50
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000 a year little more than 4 000 a
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month after calculating all your
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expenses you have 3 700 so you only have
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300
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every month for investing is it good or
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bad well it depends on the aims of the
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person if the aim is to buy a house or
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live on your investments the sum is not
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enough and you start understanding that
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after you create your budget it gives
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you the map how to achieve your
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financial goals the second popular
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mistake is not following the budget
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after you understood your aims and
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created the document this means that
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either your aims do not motivate you or
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maybe you did something wrong creating
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your budget or you just do not have the
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discipline to follow it the best
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decision from my point of view here is
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to reconsider your budget and your goals
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so it will be more comfortable to follow
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them this also leads us to third mistake
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be unrealistic about your budget when
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you try to set bigger goals which is
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great but they are not correlated to
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your current financial situation in this
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case after some time you realize that
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you do not come closer to your dreams
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and goals and you just lose your
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motivation next mistake is not track all
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your expenses and incomes maybe you have
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multiple credit cards and forget to
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write down all the spendings the
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solution for this is to use apps where
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you can add multiple bank accounts and
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track all your numbers however there is
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another thing which can damage your
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financial planning it's when you write
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down expense or income which belongs to
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another period for example you plan to
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pay your rent in january but actually
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pay it next month according to your
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personal cash flow the payment was in
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february but in your budget the sum
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should be written down in january
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because this is the expense of this
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month in this case your budget will be
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more accurate and you will know how much
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money you exactly spend and earn in a
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particular month next mistake is to plan
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and keep your budget based on your
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income without including income taxes in
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this case you also receive your own
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numbers and your budget will be
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unrealistic another mistake is not
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spending time reviewing and correcting
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your budget in most cases after some
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time you will see some little things
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which need to be improved like changing
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the name of categories calculating
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numbers differently etc i personally
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review and correct my budget every month
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when i plan numbers for the next period
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the next important thing which some
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people don't do is to have reserves for
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emergency investing education etc life
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is unpredictable and you do not know
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what can be next day or week in my
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budget i have such categories like
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investing usually it's more than 25 of
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all my income reserves five percent
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sometimes zero education five percent
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and traveling five percent the last but
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not least mistake is over complicating
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there is a famous quote everything
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should be made as simple as possible but
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no simpler when the person thinks of
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complicated algorithms checking and
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planning charts etc sometimes he or she
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does not need them the simpler rules and
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actions the better the result will be it
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will also positively affect your
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motivation to track your budget because
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you do not need to spend the whole day
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every month for calculating planning etc
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next we will talk about expense and
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income tracking usually this problem is
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solved by adding particular apps which
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connect to your bank account and track
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all your numbers if you would like to
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know more about these apps please write
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down in the comments below so i can make
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a video on them this part is quite
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simple you just gather all the
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information in one place so you can
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analyze it easier speaking about budget
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planning and reviewing it's perfect when
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you have the plan for a year and recheck
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it on a monthly basis but creating a
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monthly plan for your income and
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expenses is also okay in this case you
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will see how much money will you make
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every month and which sum you have at
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the end after all expenses this will
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give you the information of what to do
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next and how you can improve your
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numbers maybe you'll find out that you
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should break down some of your bad
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habits because they not only damage your
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health but you also spend quite a lot of
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money on them or maybe you will be hit
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by the idea of how to improve your
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income find the second job or start
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investing or maybe sell some stuff after
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a particular month is gone you can
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compare actual numbers with your plan
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expenses and incomes and see where you
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understand or overspend all these
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principles i told you before helped me
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and i continue to improve my financial
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situation with them when i was 18 10
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years ago i did not have any system and
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just spent everything i earned at the
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age of 20 i had my first business little
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shoe store which generated me some money
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as i thought while working in this
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business i took down notes to calculate
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all my daily income and expenses so then
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i tried to apply these rules to my
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personal expenses and start to check
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them too then i tried some apps for
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tracking my numbers and after that went
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to google sheets and still keep my
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budget there all this journey helped me
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to save my first ten thousand dollars in
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a year when i worked and have my
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business just from optimizing my
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expenses now i understand that it's not
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a huge sum of money but it can be a
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pretty good extra sum which you can add
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to your investing capital and by
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applying the compounding rule from my
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previous video you can significantly
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increase it in the future so why did i
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choose a simple online google table the
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answer is because i try to keep things
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as simple as possible now let's look
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through the document i will put the link
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down below in the description so you can
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download it for free i hope it will
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change your life for the better first of
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all go to the document and click create
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a copy then you can change and modify
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the document as you want so now let's go
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quickly through all the tabs in the
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budget there are several of them
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main with general numbers
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cash flow where you can write down all
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your income and expenses and the budget
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itself the main tab contains all the
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information about your average income
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and expenses total capital which you
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have for investing reserves etc then you
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have a table which calculates the total
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numbers from your cash flow for a
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particular period we will speak about
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dates and numbers little later here you
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can see your total income and expenses
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based on categories on cash flow tab you
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have a table where you write down all
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your numbers on a particular date now
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important thing here are two columns
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with the table the actual date when you
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pay something or receive income and the
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date to which it refers to remember our
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example with the rent our table here
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automatically calculates all the income
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and expenses based on the second date
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column so you can see a better picture
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about your month numbers here is the
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list of all categories for income and
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expenses for cash flow tab so if you
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want to add or delete some category you
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can do it here and then it automatically
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changes in the cash flow tab and in the
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budget tab this applies only to current
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cells please do not create new ones here
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on the budget tab you see total numbers
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for every month and for the year in
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total now let's speak about the usage of
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the document i personally start with the
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cash flow tab where i write down all my
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income and expenses then i see all
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numbers for the particular month on the
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main tab
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and copy them to the budget section
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i also write down all the numbers for
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incomes and expenses for every month in
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the plan section
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so i project how much money will i earn
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and spend for each month during the year
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in the end i'll review my budget once a
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week and once a month
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so i can make little changes to the
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document improve it
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and correct all my numbers i hope this
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information was useful and it will help
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you to be better if you have other
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useful tips please share them in the
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comments below and as always please
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subscribe to the channel so you'll be
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notified about other great videos thank
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you bye
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[Music]
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you
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