Taking Control of your Finances using a Personal Budget |
By Ashley Russell on July 20, 2011
.jpg.aspx?width=75&height=75) With a new economy built on credit cards and loans, personal budgets have been thrown to the wayside. Many people get so overwhelmed by their bills and debts that they forget how to manage their money. For most, creating and maintaining a personal budget could be an easy and cheap way to take control of debt problems—the only cost is a little bit of time.
The first step to creating your own personal budget is to identify where you are spending your money. The most efficient way to do this is to identify the five main areas of spending: annual, semi-annual, quarterly; monthly; weekly; unexpected; other. The annual, semi-annual and quarterly, are bills such as property taxes and automobile fees, which only occur at certain times of the year. Monthly bills are bills such as utilities, internet, cable, and loan payments. Weekly bills are bills such as groceries and transportation costs. Unexpected bills are bills such as home repairs and medical bills that cannot be planned for. And lastly, other bills are expenses that are accumulated based on where you spend excess money, such as dining out and outside entertainment.
Once you split your bills into these categories, you will be able to see where the bulk of your money is going. After you have an idea of these figures, you will be able to then decide which areas can handle the most trimming of costs. The first step to deciding what to eliminate is to prioritize your expenses. Obviously food and shelter are necessities. Therefore, you cannot cut the costs of these areas too much because you need these things. On the other hand, spending money on movies or a new dress can be limited. Set some goals on where you would like to cut down on spending. By having goals, you will have a better idea of how to spend your money, and you will also feel accomplished every time you reach your goals. After setting goals, you need to look into saving. Add an amount of savings that you want to achieve to your budget. That way, after you put money in your savings and pay your bills, you will know exactly how much extra money you have to spend on what you desire but do not necessarily need.
Although having an idea about your spending and making necessary changes is important, it is even more important to continue to track your progress. If you do not keep up with your spending, then you will end up going back to the same old habits that got you in debt in the first place. Recognizing that you need to spend more consciously and setting a plan and following it will have you on your way to managing and even eliminating your debt. It’s as simple having a personal budget and following it. |
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