When life hits us hard, tolls are going to be heavier!
Many of us do not think about saving up for a rainy day. By the time we take a look at our bank accounts, we’re all too often blown away by the fact that we have no funds to handle emergencies as they come up.
No one likes to prepare their personal budgets. It’s boring and not exactly the most interesting thing in the world. However, having a fixed budget is important to make sure you are not throwing away your hard-earned funds when you should be coveting them.
Calculate Your Past Spending
Analyze your expenditures from the previous month to get better acquainted with your spending habits. You can probably assume that you will be spending the same way in the future and make different plans appropriately.
Find financial records of your spending including credit card statements, bank statements, shopping bills and other expenditures. Organize every essential into categories. Create a category for groceries, clothing, makeup and accessories, hobbies, entertainment, outings and other things that are important to you. Create a box for each of them.
If your records show that you had spent $70 on “makeup” last month, then insert a budget of $70 into the “makeup” box and keep it aside. Now repeat the process with all your other categories.
Create Your Budget
Your personal budget will divide your whole income into chunks using the 5:3:2 ratios, assigning a role for every penny you earn.
Spend the first 50% of your income for your essential needs like rent, bills, utilities, and groceries. Spend the next 30% for additional costs like going for a movie or concert, eating out and for other non-essential stuff. Spend the last 20% to pay your debts if you have any. Alternatively, you could just deposit them in your saving accounts.
Basically, budgeting is all about planning well today so that you can have a better tomorrow.
Make an Annual Evaluation
You should review your budget on an annual basis.
Consider the expenses that you are going to spend just once or twice a year. This figure can be for Christmas gifts, shopping, parties, birthdays or anniversaries and similar expenses.
Readjust your budget and see if you need to spend more to meet your annual costs while still saving about 10%of your income every month. You may also need to see if you can adjust your current expenditures to make room for your annual spending.
Stick to Your Budget
Living on a fixed and restricted budget can burn you out at the beginning but you shouldn’t worry about that for too long. It takes time to form good habits and you will eventually learn to say no to unnecessary expenditures.