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Budgeting for Personal Finance

Posted on 20 January, 2014 at 17:26
We all know how important it is for businesses to have a budget but it can be just as important to have a budget to manage your personal finances.

So many people get into debt because they don’t manage their personal finances properly or become stuck when they get an unexpected large bill and have difficulty paying it. By having a personal budget it is easier to ensure that you are prepared for the unexpected and that you have money put aside ready for those large bills.

The primary goal for a personal budget is to minimise expenses and maximise savings. By cutting down on unnecessary spending and increasing your monthly savings you can put that extra saving toward long term financial goals. A budget also allows you to properly plan for and put money aside for periodic bills such as quarterly rates bills, or annual insurance bills.

Income

For most people who are in paid employment it is easy to know what your monthly income is. However for those who are self-employed or who run their own business determining income may not be quite so straight forward. In this instance a best estimate should be used, if possible aligning it with the business budget.

Fixed Expenses

There are certain expenditures which will be the same or very similar each month. These would include:      

  • Mortgage
  • Rates
  • Insurance
  • Utilities
  • Loans

These are therefore relatively easy to budget for.

Discretionary Spending

The second category of expenses are those which can vary much more, but by the same token are also those over which you have more control in terms of the amount you spend. Some are still necessary costs but others are not and can therefore be dropped if the budget does not allow for them. These types of costs include:

  • Groceries
  • Clothes
  • Eating Out
  • Car / Travel
  • Entertaining
  • Gifts
  • Holidays

By first getting a realistic picture of how much is currently spent on each of these costs and by then taking control of this expenditure your budget will start to look much healthier.

Tip! Put money into a different bank account each month for those bills that are quarterly or annual so that you have the money put aside ready for when the bills come in.

Help with Budgeting

There are many different websites that provide free templates and guidance on creating personal budgets thus making it a relatively easy exercise to perform as long as you have the discipline required. A few samples of these websites are as follows:

Categories: budgeting

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