How to make a personal budget

How to make a personal budget
Making a budget may sound boring, but it is an important part of keeping your personal finance in check. Knowing where your money is going is vital to managing expenses and making the extra money for saving. Plan budget for the certain period, usually for a month or two weeks. With these easy steps you can make yourself a personal budget in 30 – 60 minutes:

1. Collect all your financial information. More information you can collect, the better image you can get off your expenses and incomes. Collect receipts, bills, bank notes and pay slips.
2. Make a list of financial expenses and incomes. Read through your financial documents. Break expenses in two categories: fixed expenses and variable expenses. Fixed expenses are those that are vital to your well-being and happen regularly, like house payments, rent, electric bills. Variable expenses are the ones that change month to month, like gasoline, food and entertainment. At the top of the list, add your income, like a paycheck.
3. Total your expenses and incomes. The positive outcome means that you can transfer the difference into savings. If the outcome is negative, you have to make changes to the budget.
4. Adjust the budget. For best result it is important to adjust the expenses so that there is as much money for savings as possible. Think what is important and what is not and cut your expenses to save money or, at least, balance your finance near zero.

Download Excel spreadsheet to make your own budget.

How to make easy personal budget

My payday is twice a month. Every payday I make a budget for next two week’s. Because I’m lazy and I like to avoid stress I have made budgeting simple. When making a personal budget I don’t use more than three categories:

Incomes – Expenses – Savings

1. On payday take some cash aside for savings. Take the sum that fits you for savings. Pay yourself first.
2. Pay your bills. Pay your bills on payday. Sometimes there might be so many bills, that there are not enough money to pay them all. When that happens, check the due dates from the bills and skip the bills that are nearest to the next payday.
3. Think upcoming expenses for next two weeks. What expenses can you plan for next two weeks’, car repair or a visit to the barber? How many days are there to next payday? How much you’re going to spend each day? For example, two weeks expenses with $25 for the barber and $13 per day (14 days) for a living:

  • Barber $25
  • Living cost for two weeks = 14 days x $13 = $182
  • Total = $207 / two weeks

4. Cut expenses from the remaining budget. If there is any money left over, put it in the savings as well.

Tips to help keep you on budget

There might be unplanned expenses. That why it is important to check the budget every week. If the budget does not work as planned, there are two options: cut expenses or take money back from the savings. You can balance the budget using “buy nothing days”, drive straight home from work and don’t use any money.

The tight daily budget may feel hard. You can try to use envelopes. Take one envelope for each day and put daily sum to every envelope. Use one envelope per day, staying in the budget may feel easier that way.

Originally posted 2016-03-30 20:40:43.

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