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Steps to Manage Your Money - Personal Budget Accounting

Updated on June 7, 2012
Manage your money
Manage your money | Source

Monthly Budget Spreadsheet

Not all of us have a good understanding of the principles of accounting, and personal accounting for personal finance is almost unheard of. We may be sure to say that we can handle the office accounts,and yes we can stretch the petty cash in the office, but when it comes to handling our own money, we get lax. Its not as important to maintain a clear accounts register of your personal accounts is it?

Then suddenly we wake up one day and find that there is no record of where the money is going and panic. Then begins the effort to organize personal finances and the search for Free Personal Budget Software or Personal Money Management Software. The truth is you can scramble all you like to set up a budget and download software, but if you don't have the discipline to stick to it, you are not going to make much headway in organizing your personal finances.

If you have just begun earning your own keep, or if you have recently got married and realize that the personal budget needs to be clearly defined, a monthly budget spreadsheet can prove an invaluable tool. It helps you see where you get money from and where you end up spending it. Then it can help you budget a certain fixed amount of your personal finances for each of your expenses.

Let's take a look at how it works.

Manage Your Money Step 1 - Write down the expenses

For the first month we need to find out where you are spending your money. So make an expense sheet for the month. In this sheet you need to write the date and the expense side by side. Make sure that you write down every expense you make no matter how big or small during the day. Also add the label that helps you identify where the money went.

Here's an example of what the monthly expense sheet should look like.

Sample Expense Sheet for the Month

1 June 2012
Groceries 100
2 June 2012
Milk 5
3 June 2012
Movie Show 15

Manage Your Money Step 2 - Identify the different heads of expenses

Once you have monitored your expenses for a month you will realize that your expenses fall under different identifiable heads. These include

Bills - These include your rent, your phone, utilities, and any other recurring monthly payments that you need to make.

Food and Drink - This will include the groceries and other supplies you buy for consumption at home.

Medications - If you fall ill and need to spend on medicines, or if you have an ongoing medical problem for which you spend a certain amount of money each month.

Clothes - Naturally any new clothes or shoes you buy in the month go into this heading.

Entertainment - This can include all the outings for pleasure such as dining out, movie shows, or any other activities that you indulge in for entertainment.

Personal Investments - This is a heading that many people may not have, but must actually include. This is the amount of money that you set aside to invest for your future.

Miscellaneous - Under this comes any one time payment that you make in the month, or any unscheduled expense that may reoccur, or any other expenditure that does not fit the other heads. Make sure you label this section for each individual expense so that you can make an effective personal budget.

Different Heads of Expenditure

Food and Drink
Personal Investment
Fresh Fruits and Vegetables
Movie show
Mutual Fund
New speakers for computer
House Rent/ Mortgage
Milk and Dairy products
Disease Specific medicines
Dinner at restaurant
Stock Exchange
Bread and Bakery products
Bowling Alley
Fixed Deposit
Juices and Drinks
Video Gaming
Recurring Deposit
School Fees
Alcoholic beverages
New School Uniform
Weekend trips
Chocolates and Sweets

Manage Your Money Step 3 - Fix your budget for each head identified

Depending on your income and your expected expenditure you can now allocate a budget to each head of expenditure for the month. This is easy if you have a fixed income per month. You can pick off percentages of the income accordingly.

For instance Bills will get 25% of the income, Food and Drink another 15%, Medications 10%, Clothes 5%, Entertainment 10%, Personal Investment 20%, and Misc gets 10% of the income. You can keep the remaining 5% in the bank and let it accumulate for unexpected emergency expenses.

If you do not have a fixed income and are not sure what you will make on a weekly basis this can be a bit more complicated. The rule of thumb to follow here would be to save 40% of your income in Personal investments and the bank for emergencies and use the remaining 60% to meet all the other expenses that you have.

Please remember that these figures are indicative and not carved in stone. You will need to get everything organized as per your income and expenses. However the basic process will remain the same. Just make sure that you give realistic budgets for each head of expense.


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    • cashmere profile image

      cashmere 5 years ago from India

      Thank you Simone, glad you liked it.

    • Simone Smith profile image

      Simone Haruko Smith 5 years ago from San Francisco

      You're so right, Cashmere. It all comes down to discipline- no financial management software is going to provide that!

      That said, the process you've given to folks who are looking to get started is great, and the examples you've provided make it all very accessible. Lovely Hub!