Personal Finance Advice

Writing a budget can be really simple, but most people don’t ever bother sitting down and composing one because for one reason or another the process seems incredibly intimidating.  Some folks are scared that they’ll realize they don’t make enough money to support themselves, but the truth is that composing a budget can only help someone get on track financially even if the budgeting process reveals that they don’t bring in enough income to realistically maintain their current lifestyle.

Don’t make the process of writing a budget more difficult than it has to be.  Keep it as simple as possible and you’ll soon find that it’s a relatively painless process.

Here is how to get started with writing a budget:

1.  Figure out how much money you make.  Don’t just think about your main income, but think about all money that comes your way.  Add up this figure (after taxes) and write it down.

2.  Figure out how much money you spend.  This may take a little more research because you’re going to have to figure out where your money goes.  It’s fine to estimate on this because you’ll probably have to adjust every month until you get it all figured out.  Remember to include things like:

Utility bills

Recurring debt payments

Necessary expenses like food

Money for extras, like entertainment

Make a column for each expense, and then write down your estimate for how much money you spend each month for each item.

3.  See where you stand.  Subtract the amount of money you have written down for your debt from the amount of money you  have written down for your income.  Anything left over is extra and can be applied to savings, debt, or entertainment expenses.  If nothing is left over - or if you have a deficit - then it’s time to make some adjustments.

4.  Make adjustments as necessary.  Writing down a budget is a great way to get a visual representation of where you should spend less money.  If you take a look at your written budget and realize that even though you spend quite a bit of money eating out you still have barely enough money to cover your electric bill, it’s easy to see that it’s time to scale back on the dining out expenses so you can meet your other obligations.  Expect to make adjustments often, but with practice it will become easier each time.

You can add line items for things you want to buy and start putting money toward them, and you can eliminate line items for debt as you pay them off.  Your written budget is always evolving, and the more careful you are with your money the more streamlined the budget will become.

You already know that you need to write a budget, and now you know how to write a budget.  There should be nothing stopping you from getting your budget composed, and this is one of the biggest steps you can take to getting your personal finances in order.