A Crash Course in Personal Finance Budgeting

Although personal finance includes variety of concepts, it starts with a simple tool – personal finance budgeting. If you have a requisite budget, you don’t have to worry about your funds, it’s all safe.

Instead of deepening into the significance of personal finance budgeting, let’s get started with how to go about with it. Here is a 5 step crash course in budgeting.

1.    Analyze your Expenses and Income

First step includes jotting down your expenses and income. Period. You don’t have to break it up into any categories. Do not, however, forget to mention every source of income, every penny that comes to you whether it’s birthday check, inheritance, salary, and so on. Same applies to expenses as well. Do not miss out on anything to have a proper, accurate budgeting tool.

2.    Break Your Expenses into Categories

Once you know how much you earn and how much you spend, it’s time to know where your money goes. Since you have just started, I know you wouldn’t have an accurate amount for each category, but try to get an approximate figure. Categorize your expenditures into food, utility, grocery, shopping, investments, savings, and so on. Have a ‘miscellaneous’ or ‘sundry’ category to add all uncategorized expenses.

3.    Set Your Goals

I ask all my clients to maintain a personal finance budgeting journal, and I ask them to write their goals on the first page of the journal. Writing does make a difference. The more you see it, the more you think about it, and the more you remember it.

That was about the ultimate goal you want to achieve. You would also have to set a goal, or rather a limit, for each expense category. Set a goal on how much you want to save every month, but cutting down on expenses.

4.    Set a Path

If setting a goal was an easier task, here is a difficult one for you: deriving a way to achieve your goals. Some prefer to cut down on expenses radically, and some develop additional sources of revenue. I would suggest cutting down expenses from each category would be a better way to get started.

If you find it difficult to save some amount every month, here is a quick way to do it. Ask you bank or your employer to deduct some amount from your paycheck and deposit into your savings account directly.

5.    Execution and Consistency

Most difficult step of personal finance budgeting is executing your plan and being consistent. Remember, only getting started is difficult. Once you do if for few months, it would be very easy to go on. Execute the plan for sometime, consistency would follow automatically.