Are you looking forward to taking better control over your monthly spending? Then you need to think about making a personal budget plan. It can deliver excellent assistance to you with achieving both short term financial goals and long term financial goals.
The personal budget plan that you create will help you to get a better overall understanding of how much money that you obtain when compared to the expenditures that you have to pay out of your pocket. This will eventually help you to figure out whether you are earning more money than the amount you spend or not.
How to create your personal budget plan?
Now you have a basic understanding of the importance of creating a personal money management budget plan. Along with that, we thought of sharing the steps that you will need to follow in order to create your own spending tracker. Regardless of your income level, you can follow these tips and create a budget plan. Then you will be able to experience all the amazing benefits that come along with it.
– Gather all the financial statements
As the very first step, you will need to go ahead and gather all your financial statements. This includes your bank account statements, recent utility bills, investment accounts and all the other details that are related to your incomes as well as expenses. You need to make sure that you are not missing out anything at the time of gathering information. If you miss out details, your personal budget plan will be ruined. Hence, the time and effort you spend on it will be in vain as well. Therefore, you need to make sure that you collect all the financial statement before you start creating the personal money management plan. If you can have more information, the effectiveness of the time and effort that you spend will increase. Therefore, it is perfectly fine for you to take your time and work on this
– Record all the sources of income
Now you have gathered all the financial statements. This is where you can get a personal finance spreadsheet and record all your sources of income. It is better if you can use spreadsheet software such as Microsoft Excel or Google Spreadsheets to get the job done, instead of using pen and paper. This will help you to save a lot of time in the long run. Or else, you can also think about getting a personal finance app. The app will provide you with the opportunity to record all your income sources and proceed with creating the personal budget plan.
In case if you have any income sources that come out form the monthly paycheck, you need to make sure that you include them as well. In addition to that, you need to make sure that you are including the net income by reducing all the taxes.
– Create a list of monthly expenses
As the third step, you will need to think about creating a list of all your monthly expenses. You will be able to plan all the expenses that you will come across throughout the month. This will include your auto insurance, car payments, mortgage payments, utilities, groceries, dry cleaning, entertainment, college savings, retirement savings and student loans. If you are spending money on something, it will be an expense. Therefore, you need to make sure that you include it in the tracker. This will provide great overall assistance for you to proceed with the personal budget plan. You can take a look at the previous month and get some inspiration as well.
– Break down all your expenses into two categories
Upon listing all the expenses, you need to make sure that you are breaking them down into two categories as fixed expenses and variable expenses. Fixed expenses are the expenses where you have to spend the same amount of money on a monthly basis. This will include your cable TV bill, car payment and your mortgage payment. Then you need to take a look at the variable expenses, which change from one month to another. They include the amount of money that you are spending on gasoline, groceries, entertainment, purchasing gifts for others and eating out. If you need to make any adjustments with your expenses, you will need to do them on this category.
– Total the monthly income and expenses
Now you can use the personal finance spreadsheet to total your monthly income and expenses. Then you will be able to understand how much money you are getting to your hands per month and how much money you are spending out of your hands per month. This will provide excellent assistance for you to move forward with.
Based on the results that you get, you will be able to start prioritizing. For example, if you are spending more money to settle the credit card balances, you should understand why that is happening and take appropriate steps to overcome it. In the meantime, you need to think about using a spending tracker to control the expenses and increase the amount of money that you use on the retirement savings.
– Make appropriate adjustments to the expenditures
When you have the personal budget plan, you will find it as an easy task to go ahead and make appropriate adjustments to your monthly expenses. The ultimate goal that you need to achieve is to make your income and expenses columns equal. Either you have to increase the income or you need to reduce the expenses. Out of these methods, you will notice that reducing your expenses is the best option available for you to move forward with. You need to stop spending so much money on the non-essential expenses.
Now you have a clear understanding of how to create a personal budget plan. Follow these tips to create your own personal budget plan and remain financially sustainable. Here are some tips to make sure your financial budget a success.