How To Make A Monthly Personal Budget
Making budget is very essential in every individual, government or company’s financial records. In order to balance income with expenses and savings for a better life without financial mayhem, you need to prioritize a budget. It’s quite unfortunate that most people don’t give a damn to budgeting especially household or personal budget. In this post, we will focus on how to develop, make and implement a monthly personal budget for the indigenous monthly worker. It will be of great benefit it you read this post to the end of which I guess you’ll love reading it.
This post in summary, I will take you through what a budget is, the major types of budget, personal budget, the essentials of budget creation, requirements needed to start creating a personal budget, the budget making process and the implementation of budget. You can submit your comments down below at the comments section and I will answer any question to your satisfaction. Okay? Well! As I already said, budget can never be alienated from financial history because it’s very vital for it’s purpose of “financial balance”, that’s a way to to track and control the usage and balancing finance in our daily financial activities. Preparing a personal budget every month is the best way to prioritize expenses, reduce excessive null expenditure and activate the habit of savings for a great future.
Budget is the summary of planned income and expenditure for a particular period of time.
The Kinds Of Budget
Budget consist of many kinds including government or national budget, organisational budget, company budget, institutional budget, personal budget and more. The government budget is a financial statement of estimated revenue and expenditure by government for a period of usually one year. Revenue accrued from taxes and other sources are estimated to either tally(balance), with surplus or a deficit. An organisational budget is a summary plan of income and expenditure estimation by an organisation such as church, groups, associations etc. Company budget is an estimated financial summary by a company or corporate business on it’s revenue and expenditure for a defined period of time, usually a month, or three. Personal budget on the other hand refers to the allocation of monthly income on savings and expenditure. Budget is a very broad topic so as I already stated, we’ll focus on how to make a monthly personal budget.
Already defined, personal budget is purposed to allocate monthly income, expenditure, debt and savings of an individual with a summary plan. Personal budget has to comparatively compare, control and track the expenditure and savings for the individual’s monthly income. It has to do with individual’s past expenditure, savings and debt.
Before I dive into the topic itself, let’s take a look at the benefits of personal budget and budget as a whole in a person’s financial status.
Why Personal Budget Is Essential For Your Finances
A personal budget, also called household budget is very essential to the financial improvement of every individual. Your finances without budgeting means you will be spending blindly with no measurement or restrictions in spending. Whether higher, lower or balanced expenditure, you have no idea. This can be very dangerous to your financial health especially savings, it will look like building a room without measurement! You obviously know the future results. Therefore, below are some outlined importance of personal budget.
1. Personal budget enhances you to maximize your monthly income and expenditure, including savings.
2. Personality budget helps you to reach your set goals through restricted spending.
3. Making a monthly personal budget helps to keep your finances in good shape and order. You know what you are spending on and you do it accordingly.
4. Preparing a monthly personal budget gives you a head-on to grab emergency and unforseen contingencies.
6. It controls and guides your expenditure over the month, with over spending in checks.
Requirements Needed To Make A Monthly Personal Budget
Before you make a personal monthly budget, these are the requirements you must consider to get started with a good personal budget.
1. A good designed budget spreadsheet(template) or a budget app, I recommend Best Overall Mint budget app, PocketGuard and You Need a Budget(YNB) app. You can also opt to stick in to the old method of pen and paper budget making, but the modern spreadsheet or app is very easy to adapt to and is most recommended.
3. Calculate your total income after tax and income sources including allowances and part-time income.
4. Get all data of your expenses such as rent, food, bills, maintenance etc.
5. Get your monthly savings and insurance data ready.
6. Gather data of your debt, monthly
repayment plan and your credit card monthly records.
How To Make A Personal Budget
Personal monthly budget preparation goes along with estimated amount of money you expect to come to you, how much you are spending and how much to save for the month.
First of all, consider your current income and expenditure. You should gather all your financial data to get access to all information about your finances. Make sure you leave no record of your income, expenses and savings, these are the major records to a good personal budget.
The next step in your personal budget creation is to sum up your monthly income. Include all sources of income streams you receive each month including allowances and part-time income if any.
Going forward, total your monthly expenditure, that’s your bills, rent expenses, food, recreation etc. Get all these done correctly with the help of immediate passed documents to avoid mistakes.
Furthermore, outline the plans and goals you want to achieve for the month with your income such as debt repayment, rent payment, savings and insurance etc. List your goals and plans, allocating expenses to each.
Now, separate your fixed expenses such as food, clothing, bills, savings and rent from replaceable expenses such as recreation, luxury, airtime etc. By this, it means you should separate your needs from wants. Needs are expenses you can’t replace anything with or make adjustment to whiles wants are those expenses you can do away with or do adjustment to.
Make adjustment to your “wants or variable expenses” to get a balanced expenditure or “balanced budget” Balanced budget means your income equals your expenditure. Three results may evolve; either you get a balanced budget, surplus budget or deficit budget. In case your income doesn’t balance or tally with your expenses, consider making adjustment to those variable expenses. Expenses such as airtime, bundle, recreation etc which are not of much importance can be adjusted to make sure you have a balanced income and expenditure.
Moreover, sum up your monthly income and expenditure. Check if your income equals your expenditure, higher than expenditure or lower than your expenditure. If your income is higher than your expenses, consider adding extra income to savings and insurance. Apparently, make further necessary adjustment or even scrape away some of your “wants” if your expenses are higher than your income to ensure a balanced budget.
To ensure a balanced budget, use the 50-30-20 budget formula. This formula denotes that you allocate 50% of income for your needs, 30% of income for your wants and 20% of your income for savings and insurance. By this formula, you can adjust more on the 30% allocated income for needs to balance your income and expenses.
Finally, keep the records of your expenditure. Without keeping records and mindful spending, you might spend beyond your budget and if so, your finances will be in great jeopardy. Keeping records of your spending helps you to track limits of your spending. You can consider to use the envelopes formula to keep records of your expenditure. Get envelopes, allocate the money to be spent for the month into the various envelopes and identify them by writing on the envelopes, such as food, recreation, network etc in that order. So spend according to what amount is in each envelope by name throughout the month. If any envelope’s money get finished, you know that you have reached the spending limit of that.
How To Implement Your Monthly Personal Budget
Persona Budget implementation sometimes becomes a herculean task to most people but the fact is that, a well prepared budget without implementation is like a “sleeping soldier” there will still not be restrictions in spending. In order for your well prepared budget to work wonders for your finances, you must take actions according to what it says.
1. To be able to implement your budget, you should have set goals and plans. By this, your goals and plans will entice you to go according to the budget.
2. You should be honest and realistic to your self and what the budget contains and comply accordingly.
3. You should have the mindset of “budget for action” and that’s to take actions according to the budget.
4. By complying with the 50-30-20 formula. This formula allocates your income in three sections, 50% of your needs, 30% of your wants(variable expenses) and 20% of your income on savings and insurance. This will help you to comply to your budget accordingly.
5. Allocate income to be spent in envelopes with written identity. If any envelope’s money get finished then that means you have reached your spending limit.
Personal Budgeting can help improve your finances greatly. Adapting the habit of making monthly personal budget will fuel your future finance and potentially move you out of poverty. After all, restricted spending will earn you extra savings to better improve your future finance.