Creating a Personal Budget

Money doesn't talk - it walks. Designing a personal budget is the only thing that can address every one of the questions that everybody wants the answers for but that no one wants to conquer. A personal budget is tedious at the outset, but once it is in place, you'll be glad you did it.

Let's start with the basics. A personal budget is the complete list of expected expenses for a particular period of time, say on a monthly basis. This includes salaries from work, child support, alimony, income from real estate investments, and pensions. All of these sources make up your monthly income that can be used towards household expenses.

Run a total. This is the amount you have to start with. You probably can't believe you have that much money coming into the household when you open your wallet at the end of the month and nothing but moths fly out.

Now we tackle the debt. Which expenses do you pay every month. This includes mortgages, utility bills, other loan payments, child support, alimony, credit card payments, child care, entertainment bills, car insurance, and car payments. If the cost of these receipts continue to be the same every month then figuring out your budget will be easy.

You also need to set aside some money for variable expenses. Clothing, food, gas, medical co-pays, and entertainment fall in this group. Going out to see plays, movies, or to enjoy dinner are types of this kind of entertainment. Monthly cable television bills would go in with the recurring bills.

Add up all of the recurring debt and subtract that from your income. The remainder will create monthly allowances for the variable expenses. Money sent to the saving account every month can be recorded as an expense by the people. If you are having trouble saving, this is the perfect time to allocate an amount for that purpose.

Keep a log such as a check register, or use finance software aids in tracking where the money goes. One way that money disappears is through the ATM machine. The most common way to ruin your efforts to budget is also easy and convenient.

Personal budget creation is an activity for the entire family. Parents don't have to do it by themselves. Ensure every person here gets involved with the end result. After all, each person will be governed by it in some way. Children will watch how you handle money each day and learn from your actions.

Budgets are not quick fixes. Just like any other habit it will take time to become second nature. Before it is all said and done, you may find that you have to change the original budget several times until it fits your lifestyle. A good budget includes a little flexibility, but requires discipline.

About the Author

Fred Hopkins is an 9 year personal finance pro specializing in mortgage cycling and lawsuit cash advances. For more information on the loan programs he has available, visit http://www.mountaintopmtg.net.

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