Article

Have a Personal Budget
November 29 , 2012

Purposes of a budget

Planning

A budget helps you plan how your money is going to be spent. It is not intended to restrict your spending rather to guide your money to meet your financial objectives. You are more likely to reach your destination when you have a road-map in hand. Budgets serve the same purpose for your financial life.

Control

When you have a plan in hand you can know when you deviate from it. Budgets bring you back on track by helping make necessary corrections. Most people will be amazed to find how much they spend on certain categories when they start budgeting.

Budgets tell you immediately when you have money lying idle that you can invest it or purchase that laptop you had seen on advertisements.

Frees Up Time

That's the last thing you want to do - waste precious time fumbling with your finances. Budgets update you with information at your fingertips. At the year-end you can easily figure out how much is to be shelled out as taxes. 

Creating a budget

Preparing a budget generally involves three simple steps.

Identify how you're spending money now. List out the details of your income from all sources. Make a list of all your monthly expenses. You might be surprised to learn the actual amount you spend on groceries, eating out or on other entertainment is twice or thrice more than what you'd expected. Many single people tend to spend beyond their means and admit that eating out and mobile phone bills are some of the culprits that put a severe strain on their budget.

Evaluate your current spending and set goals that take into account your long-term financial objectives. You're spending habits and life style must not come in the way of achieving your future financial goals. You probably want to buy a vehicle in three years or purchase a home in six years. Today is the time to begin savings for your aspirations.

Track your spending to make sure it stays within those guidelines. Look for areas where you realize you're spending more than what's needed or justified by your income. Luxuries must not be dressed up as necessities because spending beyond means is dangerous.

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