How to Budget – Personal Budgeting in Three Easy Steps

If you are like me, you don’t want to spend any more time than necessary shuffling through receipts, looking over bills, and tracking your money. There are so many more interesting things to do than trying to balance your budget. Hopefully the information in this article can help you organize your personal budget quickly and easily so you have more time to spend on the things you want.

First I would like to stress the importance of having a personal budget. When you understand the full value of making and following a personal budget you will see that spending a bit of time organizing your finances is well worth the effort. The payoff of properly managing your money can be great – from getting out of debt and improving your credit rating to saving up for big purchases like a large screen TV or a vacation.

Here are some of the many benefits of having a personal budget:

• You can easily see where your money is going
• You can tell when you have over spent or have money left over
• You can consistently put aside money and see your savings account grow and your debts shrink
• By being in control of your finances you can sleep better at night.
• By ensuring bills get paid on time you can improve your credit rating
• You can implement cost saving measures in problem areas and see the benefits reflected in your budget
• By defining who pays what and when you can reduce financial conflicts with your partner

To create a budget you need to follow these steps:

Calculate income: In order to budget your money you need to know how much you are earning. Make sure you include all sources of income such as your paycheck, tips, bonuses, and commissions to name a few. If your income varies pick a pessimistic income to work with to help ensure you can make it through down times.

Define expenses: Once you know how much you earn you need to decide how to allocate your income into categories such as food, housing, transportation, recreation, debts, etc. The best way to do this is to track your spending for a month or two or look over your bills and receipts for the past few months. This should give you an initial idea of how you currently spend your money. From here you can make a plan for how you want to manage your money.

Track spending: After defining your expenses you can then track your spending from month to month. This involves not spending more than you have allocated for each budget category and ensuring the money that you have allocated goes where you planned such as to savings or paying off your debts. As you use your budget you may find it necessary to tweak your budget from time to time.

By following this formula for making a personal budget you will be in a better situation to reduce your debt, save for the future, and stay on top of your finances.