How to create a personal budget?


Experience shows that only then, when a person faces some problems of personal finances, mostly a lack of them, it starts to think about its personal budged and budgeting in order to avoid such problems. Planning of a personal budget allows to identify our income and expenses as well as to optimize them not only to cover all the compulsory costs, but also to save some money for the future.

Taking into account that the budget consists of income and expenses for specific, shorter or longer period of time, planning of personal budget has to start with analysis of current situation – with analysis of current income and expenses to understand what has to be changed to improve the situation. It should be mentioned that income and expenses are not only flow of cash and non-cash transactions in the bank account, but also value of your properties and debts. Only few people analyse their financial flow scrupulously because, as it is known, the flow in one direction, namely, in direction of expenses always is more intense, and it is not nice, therefore a lot of people are afraid of analysis and planning of their finances because they do not want to see the sad truth. However, as it is known, avoiding and running away from problems does not resolve them, therefore sooner of later you will have to take this unpleasant step and once and for all to resolve these problems.

The first step is planning, namely, setting of specific targets in long term, maintaining a sense of reality. Think about financial targets which you would like to achieve, for example, after 2 or 10 years. These targets have to have the golden mean, namely, they have to be high enough to motivate you to achieve them, but they cannot be too high as well, otherwise they may seem unreal and thus unreachable, and your motivation may disappear. Financial targets have to be set, basing on your current financial situation, and they have to be high and ambitious enough to motivate you. It should be mentioned that the planning of personal finances is not some kind of one-off event but the regular necessity in order to be sure that your targets and tasks work in reality as well, changing them if necessary. Budgeting has to be done at least once in a week or month – the shorter is period, the bigger are chances to notice some mistakes and to introduce necessary corrections.

When your financial future is dreamed and planned, and targets are set, specific tasks for achieving these targets have to be planned. These tasks usually are connected with boost of income and reduction of expenses, but at first it is recommended to focus on boost of income, not reduction of expenses. In this case, you have to look for additional sources of profit or possibilities to save the money. Income may be boosted by finding an additional job, boosting a workload or effectiveness of work hours as well as finding some sources of passive income. It is possible to reduce expenses by buying cheaper products, buying products in bulk as well as avoiding unnecessary and spontaneous expenses.

The most important thing is to include all the income and expenses in your budget plan because even a couple of cents may cause different mismatches in long term. While planning a budget, it is important to plan and record everything scrupulously and detailed because we all are planning our finances general, and we see to what general planning leads. Sticking to this budget is even more important than detailed budgeting because otherwise budgeting makes no sense if it is ignored. The hardest part in budgeting is starting, therefore if you will be able to overcome this step or show an interest about budgeting, you will have reached a lot in direction of positive financial future.