What Is a Personal Budget?
A personal or household budget is a budget plan or a summarization of an individual or family income with the expected expenses for a period of time, usually weekly or monthly. Its purpose is to monitor the income and to restrict spending for higher salary savings. Its goal is to have efficient spending within the family or self.
How to Make a Personal Budget
Having a personal budget is highly essential, especially if you are living on your own or still a student. A personal budget can be a great planner for those who are just starting up and are having a hard time to manage their finances. According to a study, only 24% of millennials exhibit basic financial literacy. That explains the need to practice for income and expense budgeting. A personal budget planner helps in building the foundation of learning the hows of financial management. So here are some useful steps in starting your very own personal budget.
1. The Objective
Just like any other project, you should decide the purpose and goal of the budget. Determine for whom the budget plan is for and what is the final goal for the money. Some goals or plans for the savings are for short term or long term. It is a motivation for the individual or family to keep in track with the budget plan. With a motivational goal in mind, it is much easier for them to be strict with their personal budget and fulfill the goal. That also goes to the person or the people who are involved in the plan. If the personal budget is for a single person, the goal is expected to be different from a household budget since more people are involved in the plan.
2. List of Expenses
Make a list of your or the family's expenses. It can be daily, weekly, monthly, or yearly. It all depends on your very own comfort and convenience. You can also experiment first for you to know which favors your ways better. Although annual expenses can be harder to predict, it can be helpful for better tracking. The list of expenses can vary from transport, food, house rent, water bills, electricity bills, pet necessities, individual necessities, and more. The more specified it is, the better.
3. Format Making
After listing the expenses, make a format that suits best to your favor. You have to make it as simple and understandable as possible. Open your trusted program or software; you can use MS Excel to create a spreadsheet or worksheet for your budget. First, put a title to distinguish the purpose of the personal budget at the top of the blank table. Then, insert the salary. At the very top of the table, place the total salary. If the purpose of the personal budget is for household, use the total pay of all the financial contributors, most especially, the parents. If it only involves personal finance, then use your total salary with no deductions. Afterward, put the list of the expenses. The expenses must be arranged from the most prioritized to less to monitor what needs to be paid for than the less priority.
4. Do the Calculations
After inserting the total salary and the expenses, subtract the whole expenses from the salary using the calculator. The difference is your savings. Make sure that the difference is not a negative because that only means that your expenses are bigger than your salary. If that's the case, you need to adjust your expenses to fit your total salary.
5. Review and Print
After the list and calculations, review for any errors. Afterward, save the personal budget and print.