How To Make A Personal Budget That Works

Sticking to a strict plan on how to spend your money may seem to go against the basic human instinct. We have needs and luxuries we wish to have at impulses and sticking to a budget may seem like the worst challenge of all. Yet, budgets are there to serve you and as such you can always create one that is peculiar to you and meets your financial goals. You can set up the right budget for you by understanding what a personal budget is and how you can make it work for you. 

A personal budget is a detailed financial plan used to monitor your spending. It helps you to balance your income against your expected spending over a specified period. When most people think of budgeting, they imagine it is a mathematical exercise that they have to endure, which is usually not so. Have you ever written a grocery list of items against their estimated cost before going to a supermarket? This is a form of budgeting. Personal budgeting is a self-assessment of your planned spending against your expected earnings over a specific period.

Creating a personal budget is about being intentional with how you spend your money, planning ahead to make sure you don’t run into inconveniences before your next income.

Budgeting also means you can save money for future goals and know exactly how long it will take to achieve those plans. Creating a personal budget also helps you to be more confident in spending money on the things you want without worrying that you may have to starve for the rest of the month.

Preparing a personal budget may be a stressful process but it is necessary if you ever hope to have enough money to meet your financial goals. The process requires careful consideration of a variety of factors like your total income, total expenditure and pattern of spending. The following factors are considered when creating a budget:

Planning your personal budget can be fun. Most people think of budgeting as one size fit all but this is not necessarily true. Although the end game is to spend your money wisely, there are various techniques to choose from depending on your saving habit. Below are some of the best techniques:

This is the method most people are familiar with. Using this method, you make a list of all your expenses and your income within a period, say a month, then you find the difference.

Hopefully, you earn more than you spend. After finding the difference, you then plan how

much money to spend on each of the expenses you have listed. Quite straightforward, isn’t it?

The 50/30/20 plan is a simplified budgeting technique. The idea behind this budgeting method is to breakdown down your expenses into three categories: Needs, wants, and savings, then share your income in the 50:30:20 ratio. That is, you would spend 50% of your total earnings on your needs, 30% on your wants and save the remaining 20%.

The idea behind this budgeting method is that your income minus your expenses must equal zero for each month. The normal reasoning is that you should not spend more than you earn, but zero-based budgeting says that you must not spend less than you earn.

The envelope method of budgeting works the same way as the Sub-savings account method although more manual. With this method, you divide your monthly income into physical portions towards different expense categories. Take a few envelopes and write the names of these different expense categories on each and then put the money you intend to spend on those expenses into the different envelopes.

Learn more about Budgeting Strategies

For several people, setting up a budget isn’t the real challenge but actually following through with it. In this regard, they employ practical budgeting schemes but find themselves still spending impulsively and struggling with their financial goals. Yet, there are certain steps you can follow to help you ease into sticking to a budget:

If you are ever thinking of buying something that is not a need, take at least a week to think about it. Will this disrupt your savings? How will it mess with the budget plan you have going? How much will this purchase benefit you? Then weigh the benefit over the cost to make sure it is adding value and not stressing your budget unnecessarily.

Being in debt can be very depressing. If you cannot afford to buy something at a given time, put it off till a later time when you have more than enough to afford it. Going on that vacation and then coming back home to eat concoction rice for the next one month should not be your idea of living your best life.

Make a commitment not to spend money on anything that is non-essential. This challenge can span a week or a month. Doing this would really improve your money discipline.

By creating a timetable of your daily meal or what food you need for a week would help you buy only enough groceries for that week and prevent the storage of food in the fridge that may go bad and lead to waste. This may even help you cultivate healthy eating habits.

Strolling through a supermarket with your shopping cart and seeing a stacked shelf of things you like may lead to buying a lot of non-essential things. Shopping for your groceries online might help to reduce this impulse buying significantly.

Tracking your spending is an important way in making your budget work for you. Knowing how much you make and spend monthly will limit overspending and give you better control.

The thought of creating a budget is enough to scare most people, but a budget can be very important in tracking where your money goes. The following tips can make creating a personal budget easier.

Start by identifying why you need to create a budget. Are you overspending, has your earning reduced or are you saving towards a goal? Knowing the reason you are doing something helps you see it through.

Just the word budget or the thought of creating one can be unsettling. Most people feel this way because usually, the reason for creating a budget is because of limited resources and scarcity. It may create a feeling of having too little. Therefore, using languages you are more comfortable with like income plan or spending plan may help to keep you motivated.

As discussed earlier, there are many budgeting methods to choose from depending on your preference or habit. It is good to try out a few of these methods discussed to decide on which one best suits your behaviour.

Have a good understanding of the difference between your needs and wants. Your needs are important however, your wants can be forfeited at least temporarily. Ensure you needs take priority in creating a budget.

As much as we would like to have our budget planned perfectly to cover for all our spending, a few urgent may arise which may disrupt out budgeting plan. Yet, we can take some precautions to reduce the effect. This is the importance of having an emergency fund or saving. The money from the emergency savings can be used to service miscellaneous expenses monthly.

Technology can help improve your budgeting plans and prevent setbacks. You can set up regular withdrawals into your savings accounts to service your bills and some needs automatically.

Setting up an effective budget might seem like a challenge. However, selecting a budgeting technique that works for you and following the tips to help you stay on the budget would make it seem like a run in the park. A good practice might also be to invest your savings such that it can cover unexpected expenses. You may consider investments in cryptocurrency from which you can earn a passive income to complement your income to afford more luxuries.