Making a personal budget assists individuals in managing their incomes and saving money in order to achieve their financial goals, and everyone may inquire about the basic and secondary needs that they must know where they will go each month and whether it is necessary to spend them.Therefore, this article will provide planning for making a personal budget.
Steps to planning your own personal budget
There are many steps that you must follow to create a personal budget for yourself, as follows:
First: counting and collecting your financial information.
Before you start planning your personal budget, collect your information and financial data, including:
- Bank information and data.
- Your investment.
- Bills and expenses for water and electricity.
- Your bills and expenses for the last three months.
The process of collecting information and financial data will contribute to setting the best personal budget for you.
Second: calculate your income.
Make a forecast of the amount or percentage of your income each month and record and write down all your sources of income that you expect and know, such as the monthly salary from a job, the income from your own project, or any other source that generates a monthly income for you. If you have an unstable income, such as income from seasonal work, then take the salary of the month with the least income from the previous year when preparing your budget.
Third: Make a list of your monthly expenses.
Write a list of all your expected expenses during the month, such as:
- House rent.
- Monthly installments.
- Shopping expenses.
- Child care expenses.
- Transportation and entertainment expenses, and others.
Your bank statements can help you identify other expenses you may have forgotten.
Fourth: Counting and determining your expenses
Fixed expenses
Fixed charges are compulsory charges that you pay at the same amount and always in the specified amount, such as:
- House rent.
- Pay in installments to buy a home.
- Pay your car or other installments.
You must record and add any expenses that fall under the list of mostly fixed expenses each month.
Non-fixed expenses
These are expenses that may often vary from month to month, such as:
- Shopping expenses.
- Child care expenses.
- Transportation and entertainment expenses, and others.
Emergency expenses
In the event that you do not have a list of emergency expenses, you must add one. These are expenses that may occur and occur suddenly without warning, such as stopping the car and going to the hospital.
It should be noted that you must start by defining an allowance for spending on fixed expenses and then identifying and estimating the amount of money that you will need to spend per month on your non-fixed and emergency expenses.
Fifth: Calculate your total monthly income and expenses.
When you make a calculation of your total monthly expenses and income, you should note the difference between your total income and your total monthly expenses. If your total income is higher than your total monthly expenses, this indicates a successful start, and you can therefore allocate this extra money for your savings, investments, or to pay off your debts.
And, if your expenses exceed your income, you should look for non-fixed expense categories where you can cut costs, such as:
- Reducing excessive food intake.
- Not relying on eating at restaurants.
However, if your spending exceeds your income and you have significant debts, reducing your non-fixed expenses may be insufficient, and you may need to reduce your fixed and basic expenses or work to increase and improve your income in order to achieve a good budget, and the goal is to balance and equal the income and exchange balance, as this parity indicates that your income is calculated, calculated, and balanced for specific spending.
Sixth: Monitor your personal budget.
After you have prepared your budget, you must monitor the daily expenses that you make by taking the following steps:
- Write down all that you spend and all that comes to you in terms of income. When you write down and record everything you spend during your month on a daily basis, this will prevent you from overspending and will contribute to helping you know and identify unimportant and unnecessary expenses. To do this, you must allot a few minutes a day in order to record and write down what you spend during the month.
- Monitor what you spend as you use the budget. Once you reach your spending limit in a category, you will either need to stop that type of spending for the month or move money from another category to cover additional expenses. Your goal when using your budget should be to keep your expenses equal. with your monthly income or less.
Read also: which is not a type of partnership?
