Five tips on how to plan your personal budget

If you are looking at a financial plan, in which you need your debts to be minimum and save some amount for your emergencies and for your retirement, then you should have a proper planned budget. Budget is a plan to save money considering your incomes and expenses. If you want to be debt free, save amount to buy a house and plan your retirement, then you need to prepare budget plan which helps you to achieve this. The budget helps you to spend money not more than you earn and helps you to live within your limits.  At any point of time if you are changing you company, changing your place and, when you feel that the present budget is not suiting then you have to revise your budget.  The following five tips will help to plan your budget in an effective way.

Take time to prepare your budget

You have to be organized before you start preparing your budget plan. Take your own time to decide on the plan and do not try to prepare a budget plan in a hurry. Before you plan your budget collect on the paper works which are necessary. The following are the paper works which are essential for a budget

  • Details of your expenses
  • Credit card statements which are recent
  • Bank statements of about 6 months
  • Your savings plan details
  • Bills of Household expenses
  • Details of contribution towards pension plan
  • Details of Other incomes if you have any
  • Housing loan if any

Keep Track on your expenses

By scrutinizing your credit card bills, household expenses bills and bank statements, you can get an idea of how much is your expenses. Always have exact amount you spend each month and do not make any guesses. If your figures are accurate then it becomes easy to prepare a budget and to follow it. While preparing the budget consider your expenses which are occasional such as holiday expenses, Christmas expenses, insurance premium etc. These expenses should be account in a separate column.

After considering all your monthly expenses and yearly expenses in different columns Add up all your monthly and yearly expenses and divide this by 12 (no. of months in a year). This will be your overall expenses per month which includes regular expenses and occasional expenses. This much money you have to set aside every month.

List out your incomes

Make a list of all your incomes such salary income, income from any investment, Rental income, income from any self employment, income from any properties. Always consider your monthly income and not your weekly, yearly, quarterly incomes such dividends, interest etc.  Make separate columns for regular and irregular income, which ever form you are using whether excel sheet, a note book or a separate software program me. Like monthly, weekly, yearly incomes column. Take the total of each column and add up all these, which will be your yearly income figures.

Time to consider your incomes and expenses

Now it is time to calculate the difference between your income and expenditure. Take out the yearly or monthly expenses from yearly or monthly incomes. The amount which is left is your extra money or short fall. If you are with surplus money, then there is always a scope to save money and pay your debts fast. But if you in short fall then you are in a crucial condition to minimize your expenses.

Prepare a realistic budget

It is time to prepare a budget plan. The budget plan should be achievable. The figures in the budget should be realistic. All the expenses should be accurate. But there are some of costs which are difficult to write the accurate number. Changes in your lifestyles can save cost example avoiding restaurant food.  After preparing your budget plan it is very important to follow the plan and stick to it.

Like this budget helps you to plan your expenses and minimize debts.

Author Bio Williams a famous economist writes about personal money management.

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