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Setting Up Your Own Personal Budgeting SystemPersonal budgeting is the basis of building a strong financial future. If you have a credit card and a bank account, you need to learn the basics of budgeting to keep your money safe. A budget is a schedule of income and expenses, broken into periodic intervals (usually monthly or weekly). It is a way of keeping track of all the money you earn, and it tells you how much money you are allowed to spend. Limiting the amount of money that you spend is the most important step to money management. If you can master the art of personal budgeting, then you will guarantee yourself a healthy financial future.
The first step to proper budgeting is to make a plan. The hard part is following the plan. People slip into debt when they start spending more than they save, but it can easily be avoided if they follow a simple budget plan. Click here for a simple budget plan courtesy of BetterBudgeting.com You don’t have to use their budget worksheet exactly as written; in fact, you may want to tweak it for your own spending purposes (that’s why we call it personal budgeting). There’s no such thing as a perfect budget plan. Use the budget worksheet to see exactly where most of your money is going. Then start to cut down on unnecessary variable expenses. These are expenses that are changeable or alterable: Food, utilities, entertainment, vacations. Expenses that you cannot control are called fixed expenses. These expenses include rent, car payments, mortgages, etc. and they can often be scaled down. For example, if your rent is too much, get another roommate or move to a cheaper/smaller place. This is essential to maximize your personal budgeting potential. After breaking down your expenses to variable or fixed, you can divide them further into either discretionary or nondiscretionary expenses. Nondiscretionary expenses are things you must pay for or buy, such as food, rent, car payments, utilities, mortgages, etc. They cannot be avoided; however, discretionary expenses can be avoided as they are not necessary. They include vacations, entertainment, gym/club memberships. These are the expenses you can cut down on in order to properly budget yourself. Sort your expenses into the two categories and try to eliminate your variable, discretionary expenses. Vacations and movies may be fun, but if you want to stay out of debt you have to balance your spending habits. These good personal budgeting habits will help you manage your money extremely well.
Setting up a budgeting system that works is very important. You will be able to figure out if you need to earn more money from work, of if you need to spend less money shopping. Using software to help maintain your budget is always a good idea too. There is a lot of software available to you. The most popular software nowadays is Quicken by Microsoft. Quicken includes budgeting software and many other tools to help you better manage savings and spending: * Makes online banking even better by bringing all your online accounts together in one place. * Connects to your banks, 401(k)s, brokerage or mortgage accounts with a single password. * Gives suggested spending limits and sets savings goals based on the day-to-day information you enter, and it allows you to check your progress through the month. * Accurately tracks and categorizes expenses for simpler tax preparations. Other software you can use besides Quicken are: * Home Budget For Dummies * Big E-Z Home Budget Manager for Microsoft Excel * Money Plus Deluxe by Microsoft * Microsoft Money The choices are all out there, you just have to create a budget that suits your own needs.
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