How to do Personal budgeting tips

I am sure you have heard of the phrase ‘living pay cheque-to-Pay cheque’ well don’t be surprised you may not be the only one. There has been an upsurge in people living like that in the current economic climate.

There is nothing wrong with living like that if you can manage your personal budget from one month to another without having to go into debt. But if you are suffering from debt or run into an emergency then it becomes a problem and if not addressed immediately it can grow into a BIG problem.

This is where personal budget planning comes in, if you take the time and start to list all your income, expenses and savings then you can manage your earnings with ease and therefore avoid falling into the trap of financial difficulties.

There is a problem with most budgets that is they don't work! They look at standard monthly spending, but many of us don't spend by the month, at least not fixed amounts each month – a typical personal budget planner does not take into account the daily ad-hoc expense like that coffee with a friend, your weekly shopping and that extra dress, annual holiday or the nice new car?

If your budget is done correctly then it will help you find answers to the following questions:

(1) Am I spending more than I earn?

(2) How much do I have saved for a rainy day?

(3) How much can I spend each month?

(4) What have set aside for the future?

There are many software tools available that will help you develop a personal budget, some are really good and allow you to customise the personal budget planning process so that it truly reflects your own financial circumstances.

In this hub I will simply list the items you need to create your own budget and provide links to some very useful information that will help you better manage personal budgeting strategies.

The first step is to gather all your financial information – things like your bank statements, investment account statements, monthly bills, mortgage payments, pay stubs, and so on.

The next step is to take stock of your monthly income from all sources. That should include any income such as investment accounts, trust or ISA accounts, rental property income, and part time jobs.

Now list your monthly expenses and sort them into two categories. Compulsory expenses can include mortgage/rent payments, utilities and insurance payments such as life, health, auto and contents and building. Mixed expenses could include groceries, clothing, travel, entertainment, hobbies, gifts, and dining out and that coffee with the mate.

You should also include money for your future plans – example for your next new house or car, your child's education, your retirement savings, that rainy day fund. You should factor in an amount that you should set aside for these future items, it is crucial that you do that.

When you have completed you personal budget it should tell you, if you're spending more than you're income each month, should find that you are spending more than you can afford then first take a look at trimming your mixed spending. Cut back on that extra night out, or buying that extra item when you go shopping.

Along with the above budgeting strategies you should also be looking at budgeting for your savings. You should start with a target like “I want to save £X amount per month,” or “I will increase the amount I contribute to my pension plan by Y%.” Keep this goal on the top-of-agenda as you undertake any budgeting process. By planning in your saving, you establish a plan that will lead to a more secure financial position for you.