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Creating a Personal Budget

Jun 15, 2008
Where does all that money go each month? Designing a personal budget is the only thing that can address every one of the questions that everybody wants the answers for but that no one wants to conquer. For some, you might as well be strapping the handcuffs on them. A personal budget is not an easy task to do, but it is worth the effort if you were able to complete one.

Let's start with the basics. A personal budget is the complete list of expected expenses for a particular period of time, say on a monthly basis. This includes salaries from work, child support, alimony, income from real estate investments, and pensions. All of these sources make up your monthly income that can be used towards household expenses.

Tabulate these numbers This is the amount you have to start with. It is probably difficult to believe that you have so much money entering your home when you look into your purse at the end of the month and find nothing but ashes.

At this point, we move on to dealing with the debt. Name your monthly expenses. The liabilities part include mortgages, monthly utility bills, payments of various loans, child support, alimony, credit card payments, child care expenses, entertainment bills, policies and insurance payments. If the price of these bills stays the same each month your budget will be easier to figure out.

You also need to set aside some money for variable expenses. Clothing, food, gas, medical co-pays, and entertainment fall in this group. Going out to see plays, movies, or to enjoy dinner are types of this kind of entertainment. Monthly cable television bills would go in with the recurring bills.

Add up all of the recurring debt and subtract that from your income. The remainder will create monthly allowances for the variable expenses. People who send money to their savings account each month can record that amount as an expense. There's no time like the present to start saving.

Keep a log such as a check register, or use finance software aids in tracking where the money goes. There are cases where your money just disappear through the ATM machine without you knowing the reasons behind it. It is a guaranteed method for destroying your budgeting efforts.

Personal budget creation is an activity for the entire family. Parents don't have to do it by themselves. Ensure every person here gets involved with the end result. After all, each person will be governed by it in some way. Children will watch how you handle money each day and learn from your actions.

Budgets are not easy as it seem, they should be carefully prepared and calculated. Like any other habit it practice before it becomes second nature. You have change an original budget on fits your lifestyle before you done. The best budget allows flexibility and also structures your actions according to the goals that you've set.
About the Author
Fred Hopkins is an 9 year personal finance veteran specializing in no money down home loans and used car loans. For more information on the loan programs he has available, visit http://www.mountaintopmtg.net.
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