While most people feel lazy or simply do not want to make a budget, it’s a great idea to have one set for more efficient spending and to prevent unnecessary spending.
In such a case where you spend less than planned in the budget, the remainder can be spent in another area or saved for larger use in the future, like buying a house.
How to make a personal budget
In order to make a working personal budget, there are simple things you need to take into account. The following are steps towards making a working and helpful home or personal budget.1) Note down all your income sources
Begin with listing every money you have been receiving for the last several months- like 3 months. This will most probably show you the income you will expect to get in the following month(s). For instance, employed people would use their net income amount and note it.
Self-employed people should need to honestly record their monthly earnings as well. The totals should be recorded as monthly income amount and is what is planned for in the expenditures.
2) List all your expenses for previous months
Then, list down all expenses you have had for the precious months. You will notice certain recurrent expenditures, which are most likely to be the same for the next months. Examples of this are house rent, car oil, fares, food, among others.
You can gather all available financial statements you have used for those months and use them to list what you are most likely to spend on. While doing this, honest and trustworthiness to yourself is vital so that you won’t leave anything behind.
Those expenses that happen to recur every month are classified as fixed expenses. They are normally required for your way of living.
Good examples of this include rent, car payments, mortgage expenses, and many more. Variable expenses do not come all the time and keeps on changing from day to day, e.g. eating out, gifts, car oil, entertainment, etc.
4) Compare your monthly income to monthly expenses
When income exceeds the expenses, then you can go ahead and use that as your future budget. Plan on what to do with the excess, or simply add it to your savings account. However, the results could be vice versa, i.e. expenses could exceed the income. In such a case, you should go back and review the expenses.
Try to make the necessary changes and adjustments, because you can’t plan for what you do not have. Once you feel you are completely included everything that needed to be, you can go ahead and make this your personal monthly budget.
5) Assess the budget monthly
At the end of the month, review your budget and compare it with the actual expenses for that month. This will clearly show you the parts of the budget that works properly as well as those that needs improvement. Do the necessary changes and go continue with this smooth life. Remember to take this review at the end of each month. This ensures that everything is on the right track.
It is very much advisable to have a working budget to help you track your expenses as well as income. Make sure you follow the list on your budget while purchasing any items and avoid unnecessary spending. This will help you have better financial plans and effective progress.
