A personal budget is a key component of individual finances that allows you to manage your spending and savings, as well as make important decisions in an informed manner. However, making a budget can seem daunting and complex, especially if you have never made one, so in this article we will provide you with a step-by-step guide on how to make a budget and take control of your finances.
1. Record your expenses
The first thing you should consider before making a personal budget is your expenses. So, for this you should record for at least one month each and every one of your expenses, even the smallest ones. You can use a notebook, a personal budget application or a spreadsheet.
This allows you to get an initial sense of where your money is going and what expenses are expendable.
2. Classify your expenses
The next step in budgeting is to classify the expenses I identify. The most common categories are housing, either in the form of mortgage or rent; transportation, public, gasoline or car loans; food; utilities; and leisure.
You will be able to see more clearly where you can save, where you are spending more money and which expenses are non-negotiable in your personal budget.
3. Determine your monthly income
Next, you will need to determine your monthly income. This includes your regular salary, bonuses and other sources of income. For a personal budget you should take into account all possible forms of earnings, including part-time jobs, side jobs or investment income.
It is also important to record which income is variable and which you can count on regularly.
4. Subtract your fixed expenses from your income.
The next step can be done with an online budget calculator or manually through a spreadsheet or notebook. Thus, you should subtract fixed expenses from your income when making a personal budget. This lets you know how much money you actually have available for leisure and savings.
Thus, fixed expenses are recurring payments, such as rent, utilities, insurance and car payments. In addition, their variation, if they vary at all, is relatively small. This information is crucial to creating a realistic personal budget, as it establishes a baseline and helps you determine how much you can afford to spend on discretionary expenses and savings.
5. Adjust your expenses and set your financial goals.
By this point, whether you use a budget calculator or not, you should notice, for example, if you are spending more than you earn. If this is the case, you should cut back on non-necessary expenses such as eating out and subscription services. You can also try to save in areas such as food or transportation.
Once this part of your personal budget is done, you can start setting financial goals. It could be paying off your debts, saving for a down payment on a house, among others.
Our advice is to make sure your goals are specific, measurable and achievable. If you are unclear about what kind of goals you can set for yourself, you can look for a sample personal budget on the Internet.
6. Consult a professional for your personal budget.
Although it is possible to be guided by a sample personal budget that you have found, if your financial situation has reached worrying levels, the best option is always to turn to a budget planner to help you with your personal budget.
So a budget planner can create a budget, manage your finances and help you reach your financial goals. It can also identify areas where you may be overspending and offer suggestions on how to cut expenses.
So, if you are looking for a budget planner in Canada, we recommend Poupart Syndic. They will not only review your finances, but can also choose to assist you with services as varied as a bankruptcy report or a consumer proposal.
On the other hand, if you want to learn more about personal finance you can read our other articles here.