How to make a personal budget: 5 Tips to master your finances
Learning how to make a personal budget is essential if one day we want to be millionaires.
A personal budget is nothing more than a guide that indicates what you spend your money on and in what categories most of your income goes, which can help you put a limit on your expenses and consequently get closer to your financial goals.
Learning how to make a budget is of vital importance for your personal economy, which is essential for you to differentiate yourself from the rest of the people in managing your money and prosper financially.
No matter the level of income you have, a personal budget is an essential tool to get more out of the money we receive, and that shows you where your money went.
So, given the importance, it is very important to learn how to make a personal budget.
This is why below you have a series of tips, steps, and templates that will teach you how to make a budget easily.
How to make a personal budget:
1. Identify what your income and expenses are
The first thing to do when learning how to budget is to identify what income we receive every month and what the expenses are.
Regardless of your income level, you must identify what your sources of income are and how variable they are. If you are looking to generate new income, here are 30 ideas to make money online.
In the case of your expenses, it is important that you have control of those fixed (such as water, electricity or telephone bill) as well as the variables.
The latter are the ones that should become your focus, since many times you incur unnecessary expenses that impoverish you, and that in most cases are avoidable. Continue reading: Mutual Funds | Understanding the basics of mutual funds
2. Make an evaluation of your expenses
Once you have identified all your expenses you will have to do a personal financial evaluation exercise.
This is with the objective of learning to spend wisely, so you must establish priorities and eliminate the expenses of those things that are not important or essential in your day today.
For this kind of thing, it helps to learn how to make a budget. Since you will understand that the problem is not that you do not earn enough, but that you are wasting your money on things that do not contribute to your financial goals.
In addition, there are some tricks to better control those variable expenses. For example, sometimes the expense of buying food is not known exactly.
That’s why you have to be smart and go to the supermarket with a list of everything you need and only buy what’s on that list. If you do not have it, surely buy more than you need and spend more.
It is also important to keep all the tickets. That way once the month is over we can be aware of what important things we have spent and in what things we can reduce spending.
Keep in mind that learning how to budget is not about knowing what your specific expenses are, but about identifying trends. That is, know on average how much you spend on each item and monitor their behavior over the months.
3. Set saving as the first fixed expense
You have money, it is normal that you spend but at the time of making your personal budget of expenses and income you have to force yourself to save.
To achieve this we propose to apply the savings as a fixed expense for all months. If you do not know how to start, here is a guide to learn how to save your money.
To begin, set a reasonable amount of your income which you will save. It may not be much, the idea is that you develop the habit, so you must be disciplined with this amount of money.
4. Create an interactive document to control it
The best way to control how your personal budget goes is in a document with two columns in which you can add and subtract all your expenses and income for the month.
You can use tools such as Microsoft Excel, here is a basic online course for beginners for Excel.
Each time you have an expense you must write it down in the corresponding column and if you apply a formula it will automatically be subtracted from the total money you have.
The columns should be income and expenses. Within income, you can have your salary from work, your business or your investments, for example.
Within the expenditure column, you can have food, education, transportation, gas, electricity, water, telephones, cable, internet, fuel, insurance, mortgage, credit cards, loans, personal expenses ( recreation) and, of course, saving.
5. Constantly check how your personal budget is going
Finally, it is important to check how the budget goes each month and even compare it with the previous month, since this way you will be able to see more graphically what things you have saved or what you have spent more on and you will be able to learn for the future of your actions.
Even in your Excel template, you could create conditional rules that automatically compare the budgets of each month, setting alerts or indicating percentages.
Additionally, there are many templates on the internet that help to make a personal budget. You can download some of them and guide you but keep in mind the advice given.
“Bestbusinessplans” also recommended reading this article: How To Handle Your Personal Finance?