A personal budget is basically a plan.
It is knowing how much money is made over a period of time, how much of that will go to necessary expenditures and what you will do with the remainder.
Personal budget plans begin with a goal.
Many people create a budget that will allow them to save for something special such as a vacation, an unexpected expenditure, schooling, a wedding, holiday gifts, and so forth.
A savings also provides a feeling of security.
Determining how much money is made over a period of time is generally quite simple.
Since most billings are made once per month I would use that as my period of time to budget.
You will need to calculate your net income for over that time.
Net income is the amount of money, also called "take home", left after deductions.
Your deductions include taxes, social security, retirement, employee contributions to medical and so forth.
If you are self-employed this process could be a little more cumbersome.
You may need to spend a few months averaging your net income and deductions.
You may also have periodic bills such as real estate taxes that will need to be paid twice a year, or a once a year payment to an auto club.
You can budget for these items by simply dividing by the number of months between payments and rather than paying that bill in small increment you can put it in savings.
This way you are saving towards that or those bills monthly and earning a little interest as well.
Next, you make a list of your necessary monthly expenditures.
Include such items as rent or mortgage, home insurance, utilities, personal insurance, car payment, car insurance, credit card payments, clothing allowance, payments to savings for yearly payments,and...
well you have the picture.
These are the items that have mandatory monthly payments.
You should now have an amount representing your monthly net income prior to subtracting your necessary expenditures and by adding your necessary expenditures together you have a total of amount for expenditures.
By simply subtracting these expenditures from the net you will have money, hopefully, left over for savings and miscellaneous expenditures.
Miscellaneous expenditures might be defined as those purchases or expenses for hobbies, entertainment, unnecessary fuels, travel, and etc.
Many people include this category as part of their budget.
They simply plan for a particular amount.
Finally, the left over net amount goes into savings.
On a personal note, I prefer to use a ledger recording the net income at the top and listing both the expenditures in order according to due dates and my miscellaneous expenditures.
As I pay the bill or expenditure I can subtract it from the net keeping a pretty accurate balance.
I have seen check book inserts that allow you to this.
Many people like to pay themselves first.
Rather than putting the left-overs into savings, they decide on a percent that will go to savings prior to other expenditures.
Most financial experts will suggest this as well.
If you pay a tithe to a church, you may plan to do the same as well.
A few closing points to remember: .
A budget is merely a plan.
They are not scary and they can actually be empowering.
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Stick to it.
There is a time to do some tweaking and that's ok.
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Keep your goal in mind.
I write out and post it on the refrigerator.
There is something magic about writing a goal.
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Use your budget as a tool.
Most people spend more than they can afford.
Use it to help manage your finances.
If you would like more information on budgets or budgeting go to: www.
dudesmarts.
com