In order to properly manage one’s finances, it is crucial that each individual crafts his or her own personal budget. It is probably one of the most useful financial tools out there. Luckily, making a budget is easy enough that anyone can do it.
Budgeting is also one of the best ways to keep yourself our of debt, we all like to spend our money and buy nice things, however sometimes this does lead us to spending more than we make. This is covered is a recent article called The Psychology of Debt which is also worth a read.
This article presents the simple steps you need to do to make a personalized budget.
Getting the Full Financial Picture
Before making the budget itself, you will first need to have a grasp on your financial situation. After all, your budget will serve as your financial blueprint. So, like with any plan, you will want your financial blueprint to be as accurate as possible.
Making the Budget
In order to make the budget itself, you will need to make a two-column table. One for your income flow, and one for all your expenses. Make sure that you deduct taxes from your income so that you get the actual amount.
This should be as detailed as possible. List down all your expenses, including food, rent, and utilities. By determining the amount of money coming in and going out, you will be able to determine expenditures you can trim or cut out altogether.
Do the budget regularly and make the necessary adjustments for every cycle. More importantly, follow it!