How to Create the Perfect Personal Budget in Seven Steps For anyone who wants to achieve significant success in their finances, creating a budget is a very important part of the process.
However, it is not enough to create a budget, it is highly recommended that you create a budget that works for you and stick to it.
Here is how to create the perfect personal budget in seven steps :
1. Gather all your financial statements
This is the first and most important step in creating the perfect budget. To create an effective budget that works for you, you must start with accurate data about your income and expenses. One way to achieve this is by gathering all your financial statements. Documents including account statements from your bank, mortgage, investment account (if
any), credit card deductions should be verified.
Read More :
2. Make a detailed calculation of your income
How much do you earn monthly? What kind of job do you do? All these are questions that pop up during this stage. The best way to do this is to add up all your paychecks and the amount that comes from your other sources of income. After making a total
calculation, deduct your taxes from the gross income, then create your budget on what is left also known as your net pay.
3. Write down a list of your monthly expenses
The next step is to write down a list of all the expenses you are expected to incur for the month in view. You can make this easy by reviewing all your expenses in the previous month based on your bank statement. The expenses list should include terms like utilities, car loan, travel savings, personal care.
4. Categorize the expenses
We all have different types of expenses. Some are fixed for a particular period, while you can easily make changes to some. Expenses like mortgage, car payments and child support are fixed and not subject to change for a period. While expenses like gifts, entertainment,
subscriptions can easily change from month to month.
5. Compare your monthly income and expected expenses
A budget can only be effective when your monthly income is higher than your expected expenses. Your total income should be higher than your expenses. In a case where your expenses are higher than your income, a review is necessary.
6. Try to strike a balance
Trying to strike a balance between your monthly income and expenses is very important. One way to do this is to cut down your expenses or increase your income to be able to cater for your expenses. Learn new skills, take up new jobs and earn more money.
7. Stick to your plan
If you are unable to stick to your budget, then the efforts you put In creating the budget might just be wasted. Make sure you follow your budgets completely. Also, budget applications like Piggy Vest, Personal Capital and Wally will be very useful in helping you stick to your budget.
We hope that this personal budget in seven steps will help you put your finance in good shape.