To have peace of mind and economic security, it is advisable to make a personal budget to better finance your expenses.
It is very common that in some months it happens that expenses get out of control. Sometimes we don’t have planned how much we can spend and sometimes expenses can get out of hand.
It is for situations like this that making a personal budget could give us security and peace of mind about our economic position. However, to make one that is efficient it is necessary to know and put in it the important factors.
According to the National the most common method for making a personal budget is the 50-20-30 guideline, since it allows you to distribute income in an orderly manner. The numbers that make up the method name are due to the following percentages:
– 50 percent of the income should be directed to essential expenses such as electricity and water services, food, transportation, education, medical expenses, etc.
– 20 percent of the income should go to financial goals such as savings, investments and expenses to earn debts.
– 30 percent of the remaining income is what should be applied to flexible spending, that is, everything that is bought but not really necessary, such as cinema, restaurants and travel.
Taking these percentages into account, you have to make a template to calculate an approximate of the income and expenses that you have per month, in order to keep a more organized record and thus avoid mishandling expenses.
Below, we list the steps you need to make this registration:
1. Four important factors
First, the budgets have to be divided into four different columns: description, estimated value, real value and difference.
Under the ‘Description’ column, all income received annually, such as salaries, rents, pensions or self-employment, must be placed. At the beginning of each month, under the ‘Estimated Values’ column, what is thought to be received for each of these income factors is put. Since the month is over, under the column of ‘Real Values’ will be put what was really received for those factors.
3. Savings and investments
Below the income already noted in the ‘Description’ column, the factors that generate an outflow of money destined for savings and investments must also be noted. Next to it, in the estimated value, the same is done as with income and the amount that is expected to be paid in the month for those savings and investments is put.
In the same description column, all those money outflows related to debt payments, such as mortgages and loans, must also be entered.
It is advisable that both debts and savings go a little further apart from expenses, since this way the habit of saving and debt payment can be maintained. In this way the monthly expenditure, which is the central part of the budget, will be dealt with in a more orderly way. As with income, expenses should also be calculated with the estimated value and with the real value.
You put each figure in its corresponding column. To expenses we refer to those expenses that are regularly made, such as education, food, fuel, transportation, etc. Because it is an estimate, the expenses will not be exact, but they will give us an idea of how much money we would have left of the income after having applied those regular expenses.
Finally, an evaluation is carried out where the income is compared with the expenses. This will allow us to immediately detect if there is something that does not fit with the initial planning. The key to all this is that when the behavior of money has been seen, it can be financed in a better way.
If we make this template we will not only be able to visualize our expenses in a better way, but also personal finances can be improved, and pay all the bills, leaving us the freedom to use the rest of the money for fun and other personal interests. https://www.edulane.ng/