The importance of a personal budget
Trying to manage your finances without having a personal budget is likely to end in tears ( unless you earn enough to not have to worry about money).
A simple "earnings vs expenses" budget is useful to know if you are overspending or if you have space to reinvest your money.
Do you budget?
Quick budgeting task
Here is a quick task that will help you budget:
- Add together all of your income. Whether it be from work, savings interest, pensions, benefits etc
- Make a list of all of your regular expenses I.e rent, mortgage, car payments, insurance, utility bills, grocery shopping, debt repayments Etc
- Take your expenses away from your income. The figure you are left with needs to be positive...if it isn't positive then you either have a problem now or will have one down the line.
What to do if your expenses outweigh your income?
If your expenses are more than your income there are two things you can do.
- Cut your expenses
- Increase your income
The quickest one is to cut your expenses. See what, if anything, is not essential and see if you can get rid of it. If you can't get rid of it, can you get it cheaper elsewhere? Can you haggle on the price?
Increasing your income is the long term goal though - as more income means greater flexibility and increased freedom in your day to day life. Income Academy on HubPages will show you various ways to create additional income streams to give you a better lifestyle.
There are various ways to budget - but it all boils down the need to budget so that you can tell if there is a problem with your current lifestyle. Once you know that there is an issue you can take steps to remedy it.