Are you interested in knowing more about personal budgeting? Here are the answers to some commonly asked questions.
What is a Personal Budget?
In its simplest form, a personal budget is nothing more than a record of past cash inflows (income) and outflows (expenses, including savings, debt repayment, and housing and living expenses). In its most complete form, a personal budget serves as the foundation of a solid financial plan.
By creating and developing a personal budget, we can recognize problem areas where we might have overspent, and adjust our past spending trends for the future. Essentially, tweaking our personal budget on a go-forward basis will free up cash in order for us to repay debt or save more aggressively.
How Can I Construct A Personal Budget?
There are several methods and tools that can help to create and adjust budget plans. Some such tools are:
Money management software: The software is designed to keep a track of the entire financial information of the person. The program can also categorize the individual's past expenses and create a monthly report that can be used for budgeting purposes.
Spreadsheets. With most computers coming pre-loaded with spreadsheet software, this tool makes for a great starting point. Even in its most basic form, a spreadsheet can tell us a lot about our past spending trends and, its most advanced form, can perform rather complicated calculations to help us plan and adjust for the future.
Spending management software. These programs often allow us to download transaction histories from our on-line bank. These programs will give us a good idea how we have spent in the past.
Pen and paper. This traditional method is often the easiest as we can complete a budget rather simply. Income on one side, expenses on the other. Add up the columns, then subtract one from the other to see where we are ahead or behind after every month. This method also allows the entire household to contribute to the program.
Who Needs a Personal Budget?
All of us need to develop a budget plan. Such a plan can help prepare us for financial crises like illness or loss of job. It can also track the spending habits of the individual. Ultimately a budget helps the consumers gain control over their spending to improve their financial condition.
How Do We Maintain a Personal Budget?
A personal budget is more than just putting together a great plan. In order to succeed with a personal budget, we need to monitor and maintain it. We find we will naturally be more conscious of our spending urges and will also keep tighter control on unnecessary monthly expenses.
What are the Uses of a Personal Budget?
Aside from the uses outlined already, a personal budget really helps us plan for the future - most importantly financial emergencies like temporary or permanent job loss or the death of a household contributor. In the short-term, a personal budget also allows us to measure our progress toward certain milestones.
Summary
It is recommended that one must set aside an amount that is six times one's monthly expenditure to cover any unexpected financial problem. With a personal budget, we will not only find it easier to attain this goal but we may manage with a slightly smaller savings base in the event of crisis.
What is a Personal Budget?
In its simplest form, a personal budget is nothing more than a record of past cash inflows (income) and outflows (expenses, including savings, debt repayment, and housing and living expenses). In its most complete form, a personal budget serves as the foundation of a solid financial plan.
By creating and developing a personal budget, we can recognize problem areas where we might have overspent, and adjust our past spending trends for the future. Essentially, tweaking our personal budget on a go-forward basis will free up cash in order for us to repay debt or save more aggressively.
How Can I Construct A Personal Budget?
There are several methods and tools that can help to create and adjust budget plans. Some such tools are:
Money management software: The software is designed to keep a track of the entire financial information of the person. The program can also categorize the individual's past expenses and create a monthly report that can be used for budgeting purposes.
Spreadsheets. With most computers coming pre-loaded with spreadsheet software, this tool makes for a great starting point. Even in its most basic form, a spreadsheet can tell us a lot about our past spending trends and, its most advanced form, can perform rather complicated calculations to help us plan and adjust for the future.
Spending management software. These programs often allow us to download transaction histories from our on-line bank. These programs will give us a good idea how we have spent in the past.
Pen and paper. This traditional method is often the easiest as we can complete a budget rather simply. Income on one side, expenses on the other. Add up the columns, then subtract one from the other to see where we are ahead or behind after every month. This method also allows the entire household to contribute to the program.
Who Needs a Personal Budget?
All of us need to develop a budget plan. Such a plan can help prepare us for financial crises like illness or loss of job. It can also track the spending habits of the individual. Ultimately a budget helps the consumers gain control over their spending to improve their financial condition.
How Do We Maintain a Personal Budget?
A personal budget is more than just putting together a great plan. In order to succeed with a personal budget, we need to monitor and maintain it. We find we will naturally be more conscious of our spending urges and will also keep tighter control on unnecessary monthly expenses.
What are the Uses of a Personal Budget?
Aside from the uses outlined already, a personal budget really helps us plan for the future - most importantly financial emergencies like temporary or permanent job loss or the death of a household contributor. In the short-term, a personal budget also allows us to measure our progress toward certain milestones.
Summary
It is recommended that one must set aside an amount that is six times one's monthly expenditure to cover any unexpected financial problem. With a personal budget, we will not only find it easier to attain this goal but we may manage with a slightly smaller savings base in the event of crisis.
About the Author:
With more than 15 years of experience in the financial services industry, Chris Blanchet has help thousands of client achieve their financial goals. His Personal Finance e-book outlines the fundamental of personal finances and also serves as the foundation of the Members Only website of the same name. His Debt-Free Blog can be found at How To Repay Debt.com.
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