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Creating a personal budget— Probably the first thing that comes to our mind when our finances are mismanaged and largely forgotten. It is quite intimidating to recall where we have spent our money. For setting up a personal budget, you don’t have to be an accountant or a professional bookkeeper to maintain your financial records and track where the money actually went. All that is required is to put your financial expenses into writing for maintaining a healthy life cycle of your paychecks.

Strategic Significance of Creating a Personal Budget

Let’s face it, creating a personal budget is an overwhelming task as it requires a lot of attention and focus to detail. For some, it’s easier not to think about it and spend freely rather than to sit down and pay attention to what you’re doing. As experts say, ‘it’s a lot easier to create a personal budget and much harder to follow it.’

A personal budget helps you plan your income and expenditures wisely. Those who are successful start to gain more control over their financial aspects. It would be wrong to say that our budget defines who we are, whether we are spendthrifts or skinflints. In simplest terms, the budget depends on our spending patterns. Those who are unable to plan and meet their budget cleverly may find themselves in severe agony or stark anguish. So, creating a personal budget is mandatory for those who find themselves stuck in a miserable financial crises.

Why A Personal Budget?

Undoubtedly, creating and maintaining a personal budget may be a painful process, especially for those who are not good at remembering and recording financial transactions. Logically speaking, it isn’t that hard because almost everybody knows where they spend their financial resources. All that one needs to do is record and track transactions for maintaining a healthy flow of operations and activities. No matter how difficult personal budgeting may sound, there are ways in which it can be created, organized, and maintained. 


6 Steps to Creating a Personal Budget

Your Inner Motivations or Behind the Scene Elements

To make smart use of your money, you need to dig deep into your life values such as your social, physical, and financial environment. Intrinsic motivation is derived from social pressures, societal norms, and personal values that push a person to make a personal budget for maintaining a healthy life cycle. However, this only happens when a person builds and maintain a positive mindset throughout the course of the journey. And above all, understanding goals and setting up priorities accumulates to give you more control over your finances and eventually over your life. In short, smart planning and budgeting always help you to make better financial decisions in life.

Determine How Much Money You Can Afford To Spend

This is probably the most crucial step in creating a personal budget. Obviously, you can only spend what you have in your bank account. A smart move is to keep at least 30% in reserve for dealing with an unexpected financial crises or uncertainties. These circumstances can spring up anytime– perhaps if you lose your job, become ill, or there are delays in your monthly paychecks. You can use this reserve to pay off your expenses. Before allocating money for meeting several necessities, you must know exactly how much money you can afford to spend in a single month.

Shop Smarter

By creating a personal budget, you can easily manage your budget and keep track of your finances. Most of us are impulse buyers or have an irrational buying and purchasing pattern. We hardly care about money when it comes to buying our favorite products or services. This is a major hit-back in our finances which disrupts the whole monthly budget. This pattern must be avoided at any cost! For avoiding impulse purchasing, you can make a shopping list and strictly stick with it when shopping. Look for stores that offer competitive prices, buy-in-bulk (only the things that are used a lot), take cash only, give attention to sales promotions, use discount vouchers, and, most importantly, make rational judgments when you are purchasing items.

Record Your Transactions

Every outflow of cash or funds must be recorded, preferably at the moment you make the purchase, either on your phone’s notepad or a Budgeting App. This way, you can consider this transaction when budgeting afterward. By doing this, creating a personal budget and maintaining a track of your transactions will become easier and far more convincing than ever.

Evaluate Monthly Expenses

Keeping a close eye on your monthly spending will allow you to maintain greater control over your budget. At the end of the month, you will notice and fix the discrepancies with reasonable judgment. Moreover, it will allow and help you examine whether or not you are in your budget limit.

Make Adjustments

Making adjustments is as hard as creating a personal budget… at first. This may possibly be the most discouraging element when your personal budget results don’t meet your financial needs and expectations. However, you don’t need to worry about this because, once you get used to following your budget, eventually things will start to land in your way. And, you’ll actually see that you end up with more money in the end.

Conclusion

Staying on top of your personal budget can become intimidating and challenging. For most, it’s a ‘necessary evil’. It doesn’t really matter how well off you are financially, you still need to build and establish a personal budget for making an optimal use of your in-hand resources. Creating a personal budget has become the need of an hour and those who successfully manage their personal finances save a lot of money for more important future establishments.

Check out America's Best Bookkeepers
About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual accounting, providing services to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks file and critical financial documents in an efficient and secure environment. Complete Controller’s team of  US based accounting professionals are certified QuickBooksTMProAdvisor’s providing bookkeeping and controller services including training, full or partial-service bookkeeping, cash-flow management, budgeting and forecasting, vendor and receivables management, process and controls advisement, and customized reporting. Offering flat rate pricing, Complete Controller is the most cost effective expert accounting solution for business, family office, trusts, and households of any size or complexity.

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Money can be a difficult thing to deal with, especially if you are an impulse buyer. All those who fall prey to impulse purchases can relate to the dilemma of figuring out what to spend and what to save. Impulse buying is frequent among individuals who are looking to satisfy their wants beyond just basic needs. Segregating the two and identifying when to spend on luxuries has become important in order to survive recent times when money is continuously losing value. Here, a few basic tips regarding what to spend and what to save as part of your routine personal bookkeeping process will be identified.

1. Set Priorities

The first and foremost step is to set your priorities right. Here, priorities refer to choosing what you need over what you’d be interested in buying for the sake of luxury spending. For instance, a top priority could be spending money on basic needs such as food and clothing. Remember, food and clothing can fall into the categories of either basic and luxury. Moreover, it is always a good idea to pay your bills first and then decide on your expenditures for the month. Here is a systematic way to go about doing it: pay your bills, spend on basic needs, spend on what you can’t live without, keep some money away for savings, and whatever you are left with can then be used for luxury spending of any sort. Make sure to follow this order religiously and you will not run out of cash as and when required.

2. Keep an Emergency Fund

Another tip regarding what to spend and what to save has to do with keeping money aside as savings, every single month. It is essential to keep an emergency fund where you can stack up all of your savings for times when you do actually run out of cash. This fund is something you may fall back on in times of a job loss, insufficient cash to fulfill basic needs, medical conditions where you need to purchase the necessary medications, and also during the last few days of the month when essentially every one of us is out of cash for that special take-out extra pepperoni pizza on a cheat day.

3. Don’t Listen to your Impulse

Conquer the struggle of what to spend and what to save by avoiding impulse buying. We often tend to pick up items while grocery shopping that are too fancy and inviting or, in other cases, we are just attracted to it purely because of a promotion going onto it. The overwhelming excitement of a product wears off eventually and then you see no point in making such a purchase. Hence, it is better to stick only to the items on the grocery list and not deviate from them, unless necessary. Caution! Necessary here doesn’t equate your impulse.

4. Be Resourceful

Here, you are being asked to save a little and how so? Let’s identify a few ways how you may be able to save a few bucks from your routine expenditures.

  • Try to use discounts and loyalty cards in avenues that offer similar options.
  • Buy your monthly/weekly snacks when you plan your routine grocery visit. Do not buy snacks every day.
  • Once every 3 months, plan a garage sale. You can get rid of those impulse buys this way.
  • Try to opt for generic but healthy items rather than overspending on brands. 
  • If you want books, use the nearest library rather than buying them.
  • Use the internet for essentials such as watching movies, listening to music and binge-watching your favorite series rather than going out and spending a lot on entertainment.

5. Make a Budget and Follow it

Lastly, another useful tip has to do with drawing up a realistic budget and sticking to it. A budget will enable you to list your monthly expenses and income. Simultaneously, you may also draw up a list of your needs and wants. Once the allocation is complete on each of the needed items, you will have an estimate of how much money you are left with to satisfy your wants. However, this extra money must not be entirely spent on that particular want, a portion of it must go into the emergency fund and savings under all circumstances.

Conclusion

These five tips can help you through the struggle of what to spend and what to save without much hassle. Stick to these and you are good to go!

Check out America's Best Bookkeepers
About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual accounting, providing services to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks file and critical financial documents in an efficient and secure environment. Complete Controller’s team of  US based accounting professionals are certified QuickBooksTMProAdvisor’s providing bookkeeping and controller services including training, full or partial-service bookkeeping, cash-flow management, budgeting and forecasting, vendor and receivables management, process and controls advisement, and customized reporting. Offering flat rate pricing, Complete Controller is the most cost effective expert accounting solution for business, family office, trusts, and households of any size or complexity.

 

 

 

 

 

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When you have no idea of where your money goes, your financial situation can become chaotic, making you lose control over your finances. On the other hand, when you are aware of your complete monetary flow, spending, saving habits, and financial goals, you tend to make smart decisions with your money, improving your overall financial health and outlook. You have to create a budget to help you do just that.

‘Budget your money!’ This is the powerful mantra that every money advisor and bookkeeping expert suggests to their clients. In fact, budgeting is the most fundamental and effective tool for managing your finances. It clearly demonstrates your fund allocation patterns and the choices you have on what items to enjoy. It will liberate you from overloading debts and the grief of overspending. Although, creating a budget is verily more work, it pays off immensely with many great life-enhancing advantages.  Here are the reasons why it is essential that you create a personal budget.

Keep your Eye on the Prize

Budgeting helps you map out your long-term financial goals and work towards them. On the contrary, drifting aimlessly through life and spending your money on every shiny, attractive item that simply catches your eye can hardly help you save up enough funds to pay off your debts, buy your dream car, put a down payment on your home, or go on vacation with your family.

When you create a budget, you tend to follow the path leading towards your goals, save money smartly, track your financial progress, and realize your dreams. You won’t feel misery over realizing that the brand new Xbox game does not fit your budget as you are saving up for a new home (or something else) which is another long-lasting attraction.  

Gain Control Over your Finances

Create a budget for yourself if you want to become intentional about your spending and savings. Consequently, budgeting enables you to control your money rather than let it control you. It prevents the sudden hassle of having to adjust to a lack of money which occurs when you initially fail to plan your spending. In addition, budgeting also helps you decide whether you should sacrifice short-term spending, such as purchasing cheaper hair products, in return for a long-term advantage such as a new laptop or car.

Spend Money within your Means

Credit cards are often the leading reason for most consumers who spend money beyond their means and do not most often realize they are overspending until they are drowning in heavy debt. However, when you create a budget and stick to it, you will never see yourself struggling in such a precarious position. In fact, you will know your exact earnings and affordability to spend every month and how much you have to save to realize your money goals.

Stay Focused on your Financial Goals

In the business environment, budgeting and bookkeeping can help avoid spending unnecessarily on products and services that typically do not aid in attaining financial goals. When you are juggling with limited resources, create a budget to easily make ends meet.

Be Prepared for Emergencies

You never know when life will strike you with unexpected events such as getting laid off, becoming sick or injured, a loved one’s death, or getting through a divorce. All of these can result in serious financial disasters. Evidently, such emergencies often seem to arise in the worst possible circumstances when you are already in need for money. That is exactly why you have to build an emergency fund.

Consequently, create a budget that includes an emergency fund consisting of a minimum of four to seven months worth of living costs. This extra fund will tend to save you from drowning into the depths of chronic debt upon a severe life crisis. Certainly, you have to show patience and perseverance to save up such an emergency fund. However, avoid allocating the majority of earnings into your emergency fund. Rather, device it into budgeting with realistic goals and begin small. Simply putting $10-$30 aside weekly will slowly build your emergency fund.

Check out America's Best Bookkeepers
About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual accounting, providing services to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks file and critical financial documents in an efficient and secure environment. Complete Controller’s team of  US based accounting professionals are certified QuickBooksTMProAdvisor’s providing bookkeeping and controller services including training, full or partial-service bookkeeping, cash-flow management, budgeting and forecasting, vendor and receivables management, process and controls advisement, and customized reporting. Offering flat rate pricing, Complete Controller is the most cost effective expert accounting solution for business, family office, trusts, and households of any size or complexity.