Do Personal Budgets Work?

It does not matter if people have a lot of money, or if they have a little money to work with, everyone can benefit from creating and maintaining a personal, financial budget. People, who have a budget, have found that it is much easier to handle their finances and save money than it was when they did not have a budget.

Why should people create personal budgets?

It is unfortunate, that many people wait until they are in terrible debt before they think about creating a budget. It is best to create a budget from the very beginning. However, no matter what financial situation people are in, a carefully worked out budget can still help them handle their finances.

When people have budgets to live by, they are much more likely to notice where their money is going than if they did not have budgets. They will also be more careful about spending their money in various places than they would be if they did not have a budget. Statistics show that people, who maintain personal budgets, are more likely to say no to unnecessary purchases than those people without budgets. When people save money on all these unnecessary purchases, they can use the money for essential things such as credit card debt or medical bills.

How does one begin creating a personal budget?

It is a smart idea to spend one month keeping track of all of the things that people spend their money on before they begin creating a budget. This gives them an idea of where their money has been going and what they need to focus on. It will also show them what they may be overspending on and where they can save. Keeping track of monthly expenses for one month will show people how much money they need for various essential expenses. Even after people create a budget, they should continue monitoring their spending habits closely to determine if they are staying within their budgets. If they are not staying within their budgets, they will need to make adjustments.

Is a budget a one-time creation?

It is essential to note, that budgets are not totally solid. People will often need to change them or adjust them for different reasons. Some of these reasons include a loss of income, a gain of additional income (better-paying jobs or pay-raises), additional bills (unexpected medical bills, educational expenses, unexpected deaths, unexpected car or home repairs, moves to cheaper or more expensive homes), pay-offs of current bills and yearly expenses (income taxes, property taxes and vehicle registrations). Thus, it is best to view a personal budget as a framework that people will need to alter constantly.

What are the actual steps involved in creating a personal budget?

Creating a personal budget is virtually easy and anybody can do it by following the easy steps as outlined below.

  1. First of all, after monitoring their budgets for a month, people should write down, on either a piece of paper or a spreadsheet on their computer, all of their monthly expenses. This may include such things as rent or mortgage payments, groceries, credit card payments, phone bills, utilities, car payments, insurance bills, internet bills and entertainment allotments. People’s lists may vary and may include more or less expenses than these examples.
  2. Next, they will want to find a copy of their bank statement either online or a paper version. They should then add all of their incoming income to their bank statement. For those people, who have more than one form of income, they should list each form of income separately noting beside each one whether it is weekly, bi-weekly or monthly income. They also need to check their income against their bank statement to ensure they did not forget anything.
  3. The final step is adding up all the money, that people are paying out each month, on one side of the paper and adding up all their forms of income on the other side of the paper. If their expenses are less than their income, that is fantastic. However, if their expenses are more than their income, they will need to look at their unnecessary expenses and see what they can reduce or eliminate. Unnecessary expenses include such things as eating out, going to the movies, buying video games or buying jewelry or fashionable clothing. There are many more unnecessary expenses people may spend their money on, and those listed are just a few.

In conclusion, the better that people handle their finances, the more finances they will have for extras. Creating a personal budget is essential for anyone’s financial success. As stated earlier, once people have created a personal budget, they will need to adjust it accordingly depending on various factors. They must simply repeat the above easy steps whenever they feel it is necessary to re-evaluate their finances; and in no time, they will find they have much less financial worries than they had before they created a budget.

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