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How to make a personal budget and manage finances wisely


Date Posted: 1/14/2013 2:35:02 AM

Posted By: Trizah Munyeki  Membership Level: Silver  Total Points: 265

Firstly, one needs to know what it means to make a personal budget. A personal budget includes all your income and expenses that you have on a monthly basis. When you have your budget you have a financial plan which determines the amount of money that you will spend on various expenses each month. Your budget will also take into account your income, debt outstanding, savings for retirement and the amount you have for emergencies.

Your budget will allow you to understand your personal finances and also how you are spending your money. Making a personal budget will also help you to determine whether or not you can afford to purchase a home, vehicle or possibly a computer that you may have wanted for a long time.

It is important to ask oneself: why should i make a personal budget? A budget help you keep track of your money, by helping you determine how it comes in and goes out(earned and spent) so you can avoid borrowing money or applying for loans. As a matter of fact, you will discover that by creating a budget, you may be spending money every month on something you don''t really need or want.

By creating a personal budget you will write down your income and your expenses. It might surprise you to see where your money is going after tracking your expenses for a month.

How to get started creating your own budget. You can start by writing down all the income that you receive on a monthly basis. This income would include money from your job, child support, social security and any income you may receive. After writing down your income, put down all your expenses which may include your rent, mortgage payment,electric bill, phone bill and any other monthly expenses that you may incur.

What if

ones income does not cover their expenses each month? In this case, you should consider adjusting your expenses by selecting some or all of the following options: consider cutting down on your entertainment expenses such as going to a movie every week and eating out often.

Is there a certain amount of money that one should consider spending on household expenses when making a personal budget? The answer is yes; though the amount of money one spends depends on where they live. Below is a general guideline on what percentage of ones income should be allocated to these particular expense areas: housing 31%, transportation 17-20%, food 10-15%, insurance 5%, savings & investing 10-15%, health care 5-8%, clothing 5% and entertainment 5%.

To sum up, it is highly crucial to keep in mind that patience is a virtual. This implies that one should hold off on making a purchase until one has planned for that expenditure. Simply avoid impulse buying and in the long run you will be glad you were financially self-disciplined.

Practice making a personal budget and you can bet on having an all round income-expense cycle. Always remember to scratch your back to where you can reach. That is, if you have a low or average income, do not make an overambitious budget because chances are you will end up with frustrations as your income will not cover your expenses and hardly will you have any savings. On the other hand, for those with a high income, they should not turn into spendthrifts simply because they have the means for there is a tomorrow which may dawn on them bankrupt. Be wise, make a suitable personal budget.

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