There’s a famous saying: “What gets measured, gets managed.”
This saying rings especially true when it comes to your finances. If you don’t manage what you spend, save, and earn, you’re bound to make financial mistakes that may run your finances dry.
Sounds bad right? Well, this doesn’t have to be the case if you manage your money properly. That’s where a personal budget comes into play.
A personal budget helps you track your finances so you can allocate your resources to the right areas, save more, and give yourself more financial breathing room.
Today, we’ll give you 5 tips for creating a personal budget…
1. Know Your Monthly Income
If you have a set salary, then it’s quite easy to calculate your monthly income. It’s the same every month!
But if you have multiple sources of income, or a commission-based job, then your income will vary. So you’ll rarely be 100% certain of what you’ll earn each month.
In that case, be conservative with your income estimate. It’s better to err on the side of being too conservative and underestimate your monthly income, than to overestimate and budget with more than you end up earning.
In the former case, you’ll just end up with a little more spending money at the end of the month, while in the latter, you’ll spend more than you made!
2. Know Your Monthly Recurring Expenses
This one is easy to calculate too. Your monthly recurring expenses will be pretty much the same every month. So make a list of those expenses and factor them in. It’s also a good time to consider which of those expenses you can cut out in order to save a little more money.
3. Know How Much You Want to Save
As a general rule, you shouldn’t spend as much as you make. That’s like living on financial thin ice.
Instead, figure out exactly how much you’d like to save each month. Keep in mind that you can invest these savings, and also use a portion of those savings for your “emergency fund” to buffer you in case anything goes wrong.
You never know when unexpected expenses like car repairs or hospital bills, will pop up, so your emergency fund will help keep you prepared.
4. Adjust Accordingly
You probably won’t create a perfect budget the first time around, and that’s okay.
Perhaps you realize you allocated too much in one area that would’ve been better used in another, or perhaps you get the desire to increase the amount that you save.
Whatever the case, evaluate the budget each month and consider what parts (if any) need to be adjusted and improved.
5. Use the Right Tools to Track Your Spending and Budget
With all the great new apps out there, it’s never been easier to track your monthly spending as well as your budget.
Here are a few of our favorite apps to do so:
Wrapping Up Tips for Creating a Personal Budget…
A personal budget can be one of the most powerful tools in your financial arsenal. It helps you make smarter financial decisions, correctly manage your money, and avoid getting into crippling debt.
Use the tips here to start creating your personal budget (or improving on your current budget) today!
What other tips would you give for creating a personal budget? Let us know in the comments below!