Personal budgeting – The first step to achieve financial freedom
Personal budgeting The first step to achieve financial freedom
It is quite important to plan a budget regardless of whether or not you have debts to pay off. Budgeting is the basic step of every financial planning. You can never achieve your short and long term goals if you cannot make a proper budget plan.
5 Steps to plan a personal budget
While setting up a budget plan, at first, you should decide your budget structure that is, whether you want to plan a weekly, monthly or an annual budget. You can plan as per your bill payment requirements.
Here are 5 steps to plan a monthly budget.
1. Calculate the amount you earn To plan a budget, at first, you need to calculate your total income. To do so, gather all your financial statements, such as, your bank statements, your investment accounts statements, etc. to calculate your total monthly earning. If you earn extra over and above your monthly paycheck, then make sure you take into account the income while calculating your monthly income.
2. List how you spend your income After calculating your income, it is the time to write down all your expected monthly expenses. Firstly, list your fixed expenses that more or less remains same every month. It includes your mortgage payments, cat loan payments, etc. Next, list your variable expenses and put an average amount against each of them. It comprises of the money you allot for entertainment, grocery shopping, buying gifts, etc. This is quite an important category if you need to cut down your expenditure.
3. Calculate how much you're able to save Check out whether or not you're getting a positive figure after deducting your expenses from your overall income. If yes, then you have a surplus amount that you can utilize to pay off your debts fast or to build an emergency fund. However, you may need to cut down your expenses and plan accordingly if your income is less than what you spend every month. You may also have to make adjustments and plan your expenditure accordingly if you want to save more than what you've been able to do so far.
4. Plan your expenditure as per requirement While planning your expenditure, remember to plan it realistically so that you're able to follow it. Otherwise, you'll not be able to stick to your budget plan for long.
5. Take help of personal budgeting tools There are several personal budgeting tools and applications that you can use to plan your monthly budget. All you have to do is browse through the personal finance websites and choose such a tool where you can list your income and expenses and you'll get how much you're able to save monthly, quarterly or annually.
Your task doesn't end just by planning a budget. You need to follow it and review it from time to time in order to ensure that you're on the right track. It is also quite important to make the required changes whenever necessary. This will help you to improve your fiscal fitness and have a better control over your spending.
http://www.articlesbase.com/personal-finance-articles/personal-budgeting-the-first-step-to-achieve-financial-freedom-2657612.html
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