What Is Personal Budgeting

What is a Budget?


A budget is a plan or forecast of where and how much the inflows of money and outflows of money over a specific period. A personal budgeting would make sure you know clearly where your money comes from and where it has been spent. It is vital to keep a good control of your personal finance.

 

Function of Personal Budget: Tracking Income

 

The first thing to do in your personal budgeting is to identify your income. Income refers to your salary, wages, dividends, interest, rental income, business income etcetera. If you have a working spouse, you may add in his or her income as well.
 

Function of Personal Budget: Tracking Expenses

 

You need to fund your living expenses with your income. Here is where you have your expenses. There are two types of expenses: fixed and variable. Fixed expenses include your car loan, mortgage loan, insurance, taxes and other expenses with fixed amount. Variable expenses, on the other hand, include groceries, utilities, gasoline, transportation, entertainment etcetera. Variable expenses is the area where you can adjust with ease.

 

Function of Personal Budget: Check and Balance

 

Now, all of the information of your inflows and outflows is with you. You should subtract the total expenses or outflows from the total income or inflows. If the outcome is positive, you have a budget surplus. Your cash flow situation is healthy. You may have a budget deficit as well. That happens when your expenses or outflows are more than your income or inflows. That is a warning sign for you to improve on your situation before accumulating debts.

 

You may have to see if you can cut your spending on the items like entertainment, groceries, hobbies etcetera. A little bit of adjustments here and there will bring significant improvement on your personal budget. You will have $300 extra cash by the end of the month for cutting $10 in your daily expenses.

Making your own breakfast instead of eating out, take one donut instead of two during your tea break, reduce to ten cigarettes a day instead of your usual fifteen may help you to make it.

 

Control your personal budget is not as difficult as you may think. Some minor changes on your spending habits may do.

 

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