BudgetingManaging ExpensesPersonal Finance

Personal Budget – Important first step!

personal budget

One of the most important things to worry about when trying to have healthier personal finances is the amount of money we spend. On a daily basis, we are prone to pay for little things that may look harmless at first because of the minimal amount of money it is costing us at the time. But, if we were to keep track of all these expenses, at the end of the week/month we would be surprised of the total amount.

This is one of the main reasons why it is fundamentalto create a solid personal budget. In this, we will establish accurately the amount of money that is expected to be received as an income, and also the amount of money we will allow ourselves to use out of the income.´

Depending on the personal situation, it might be better to create a daily budget or a monthly budget. For example, if you create a monthly budget and you have an annual payment to do on a set month; it could be considered as a normal expense without any problem. But, if you get paid on the 25th and the annual payment has to be made before the 10th, for example, a daily budget would alert you of this situation. You will not have enough money to pay on time.

But this situation could also be solved by having an emergency fund that would let you take money out of it to pay for the additional expense, and then when you get paid, put the amount you took back into your emergency fund.

Regardless of the approach you take while creating a personal budget, it is extremely important to keep “feeding” it with expenses that you may have overlooked while creating it at first. It goes without saying that a personal budget is supposed to be followed rigorously; it would be worthless if you keep spending money without taking into consideration the budget that you created.

Keep an eye on the expenses that are not considered in your budget

We all know that sometimes we feel the urge to buy things that we do not actually need. A personal budget will help you to stay away from those kinds of expenses. We all have a bit of a compulsive buying disorder within us, some more than others. Without a proper control of our expenses, we may think that we are able to buy things as a whim, when it is probable that if we do we may run into trouble at the end of the month.

With a personal budget, you will be able to filter all those expenses that you come across from time to time and analyze if you can actually pay for them. If you receive an email that offers you a super promotion to go on a quick weekend tour for $250 you might feel tempted to accept it, but by checking your personal budget you can know for sure if you are able to pay for it. Remember that you can also make adjustments on-the-go, if you really want to go to that tour, you might be able to squeeze the money to pay for it by reducing the budget on a different expense.

Also remember to have a set amount for monthly leisure expenses. A bit of money for fun things is as important as any other expense!