A personal budget is nothing more than a guide that indicates where you spend your money and in which categories most of your income goes. Creating a budget can help you put a limit on your expenses and consequently get closer to your financial goals.
No matter the level of income you have, a personal budget is an essential tool to get more out of the money you receive, and it shows you where your money went. This is why below you have a series of budgeting tips, and steps, which will teach you how to budget easily.
How To Create A Personal Budget
It is not so difficult to create a personal budget for your household. The key is just getting started and using the right tools to keep track of your income and expenses. Here are some budgeting tips to consider below.
- Identify what your income and expenses are: The first thing to do when learning how to make a budget is to identify what is the income that we receive from month to month and what are the expenses.
- Keep track: Regardless of your income level, you must identify what your sources of income are and how variable they are. In the case of your expenses, it is important that you have control of those fixed (such as water, electricity, or the telephone bill) as well as the variables. The latter are the ones that should become your focus of attention, since many times you incur unnecessary expenses that impoverish you, and that in most cases are avoidable.
- Make an evaluation of your expenses: Once you have identified all your expenses you will have to do a personal financial evaluation exercise. This should be done with the aim of learning to spend wisely. Therefore, you must establish priorities and eliminate the expenses of those things that are not important or essential in your day today.
Stop Wasting Money
Learning how to budget is helpful for these kinds of things. Since you will understand that the problem is not that you do not earn enough, but that you are wasting your money on things that do not contribute to your financial goals. In addition, there are some tricks to better control those variable expenses. For example, sometimes the cost of buying food is not exactly known.
You have to be smart and go to the supermarket with a list of everything you need and buy only what is on that list. If you don’t have a list, surely you buy more than you need and spend more. It is also important to save all your invoices. That way, once the month has passed, you can be aware of what unimportant things you have spent on and what you can reduce spending on.
Keep in mind that learning how to budget is not about knowing what your specific expenses are, but about identifying trends. That is, know on average how much you spend on each item and monitor its behavior over the months.
Establish Saving as the First Fixed Expense
You have money, and it is normal for you to spend it, but when it comes to making your personal budget of expenses and income, you must force yourself to save. To achieve this, it is proposed that you apply savings as a fixed expense every month. To start, set a reasonable amount of your income that you will save. It may not be much, but the idea is that you develop the habit, so you must be disciplined with this amount of money.
Document Your Budget
Create an interactive document to control it or use an App. The best way to control how your personal budget is going is in a document with two columns in which you can add and subtract all your expenses and income for the month. You can use tools such as Microsoft Excel or download a mobile app on the Internet. You can find a wide range of these types of programs and applications. Every time you have an expense, you must write it down in the corresponding column or space.
Within the income category, you can have your salary from work, your businesses, or your investments, for example. Within expenses, you can have food, education, transportation, gas, electricity, water, telephones, cable, internet, fuel, insurance, mortgage, credit cards, loans, personal expenses (recreation), and, of course, savings. You should constantly check how your personal budget is going.
Finally, it is important to check how the budget is going each month and even compare it with the previous month, since this way you can see in a more graphic way what things you have saved or what things you have spent more, and you can learn for the future.
There are a large number of personal finance applications that you can find useful to control the management of the home and pocket. You can download some of them and guide you, but keep in mind the advice given.