Creating a Personal Budget
The new year is here, and many people’s resolutions have already been cast aside as failures. Whether you chose to go to the gym more, eat better or save money, for some reason, it just isn’t happening and, for some, giving up seems to be the right solution. Perhaps you chose to save money in 2018 and you are struggling to do so. Maybe you are considering giving up on that resolution. If so, don’t! Keep reading instead as we are going to show you how to create a personal budget that will enable you to save more money this year and achieve that resolution.
Budgeting is a Lot of Work
Many people are averse to personal budgeting due to various reasons. At first, creating your own personal budget can be time consuming, especially if you have plenty of income and spending components. Eventually, creating a personal budget can be quite complex and many people might not have the skills to maintain it. However, it is possible to simplify personal budgeting and give you a good idea of your overall financial picture. You will understand whether what you are spending is needed, whether something adds real values to your life and whether it is worth it.
Here are six steps to creating your personal budget:
- Make a list of your spending categories, such as insurance, mortgage, utilities, food, children education, credit cards and others.
- Jot down sensible amounts that you should assign to each spending category. This will serve as limits to avoid overspending your money. You can change these amounts later as you see fit.
- It may take at least three months to have a fully working budget, but this is just part of the process. During this three-month period you should write down all income and spending details. There are always fluctuations in each month, but there are also a lot more repeated patterns that can keep your budget consistent.
- After the three-month period is over, gather all of your statements, bills, pay slips, receipts, notes and records. Perform a comparison between projected values in the budget and real-life expenses. You will know whether the values that you set earlier make sense.
- Analyse your data. If you regularly overspend, find reasons why you can’t stay within the original limits of your budget. If you don’t overspend, congratulate yourself. But look further to see if you can reduce your expenses further, so you can assign more money into a savings account or investment.
- After your budget becomes sustainable and consistently reaches its target, it’s time to set up a tracking system. You may use financial sheets to record all transactions easily. It is recommended to use software-based tracking solutions, such as Microsoft Excel. There are samples of Excel financial sheets that you can download for the basis of your tracking sheet.
Creating a personal budget for your New Year, New Me resolution is easy when you follow these simple tips and reduce any unnecessary spending. Remember to ask yourself before you spend, “How is this going to benefit my life?” and you will find that you might not be spending as much as you did last year.