Successful Personal Budgeting
If the most difficult thing about getting fit is putting on your trainers for that first gym visit, then the most difficult thing about creating a personal budget is deciding to do it. Investing time in reviewing your income and taking a deep breath and looking at the truth of your expenses might seem daunting, especially if you're looking to change your financial situation, but time spent doing that now could be the key to personal financial control.
1. Figure out What Income to Include in Your Personal Budget Plan
The first step to create your personal budget plan is the most straightforward. Start with a clear idea of all the income you can account for in your plan -- any benefits you may receive from employment or any relevant share of the household budget, if you are setting out a plan for yourself and others in your family.
Be realistic, especially for seasonal or freelance income; make your figures after taxes, and note at this point any potential changes, such as changes in your employment or changes in your family situation, that might impact benefits to which you are entitled.
Enter your figures into one of the freely available templates that you can download from the web, such those available from the template sections of Google Docs or Microsoft Word. Alternatively, templates can be found on the sites of major institutions like Bank of America, or sites such as Vertex42.com.
2. What Expenses Need Accounting for in Your Personal Budget?
Honesty and accuracy are essential to create an effective personal budget; you need to be completely aware of your current expenses in order to write your plan.
Larger, fixed expenses, such as rent or mortgage payments, childcare, insurance and taxes, are the best place to start before moving onto the other large but less predictable costs, such as running a car or paying for groceries.
To calculate these changeable costs, you can refer to recent bills or credit card and bank statements to review your expenses. Alternatively, you can spend time maintaining a spending diary on your phone or in a handy notepad, keeping receipts and writing down the details of all spending. While this can be time-consuming at first, it is the clearest way to get a true picture of your expenses, and working to this level of detail will give you the best possible budget.
3. Write Down Your Plans and Goals
This step should be more inspiring -- what goals are you striving toward? It may be to pay down debt, be mortgage-free, prepare for retirement or simply keep a closer control on your finances in general. Whatever it is, writing goals down makes them more tangible and easier to focus on.
Your budget plan should now be largely complete, with incoming money listed and expenses either detailed or estimated. You might choose to estimate first, and firm up the numbers as time passes or as you adjust to keeping your budget, especially if you are making changes to your spending and saving habits.
Using the budget sheet, plan for known expenses, such as estimating the likely cost of running your car for the year, or ensuring that you have savings to celebrate birthdays and holidays. You can plan to put aside this money on a monthly basis, either in a virtual 'pot,' setting it aside from your everyday money in a different bank account, or by keeping cash in a physical place so you can watch your savings grow.
4. Share Your Situation
If you are making changes to your lifestyle as a result of your new budget, you need to be prepared to discuss this with friends and family. It can seem counterintuitive, as debt, or money generally, are not topics many of us feel comfortable discussing, but if you are making changes that will impact your social life, or your family, telling them about your decisions upfront will give you a circle of support when you need it.
If your budget planning has shown that you have a level of debt you are concerned about, or you need further help with managing your money, this is the time to seek help. If your concerns are serious, look for help from reputable local debt counseling services. If you just need a helping hand to keep on track, try some of the excellent personal finance blogs available such as getrichslowly.com/blog, and themoneyprinciple.co.uk -- a whole community exists, virtually, to support each other and help readers work toward their own personal goals every day.